RBI MPC Meeting 2026: Malhotra & Co hike repo rate by 25 bps to 5.50% for first time in nearly 4 years as inflation pressures build

The Reserve Bank of India's Monetary Policy Committee (MPC) increased the repo rate by 25 basis points to 5.50% during its meeting on Wednesday. This marked the first rate hike in nearly four years, driven by rising oil prices due to tensions between the US and Iran, and a weak monsoon season threatening to escalate inflation. The six-member committee unanimously approved the rate hike, signaling potential further increases.

The policy shift was announced by Governor Sanjay Malhotra, who began his tenure in December 2024 and led a series of rate cuts earlier this year. The move aligns the RBI with other Asian central banks that have started tightening policies amid renewed inflation pressures. Inflation is nearing 5% over the past three months and is expected to approach the upper limit of the RBI's 2%-6% tolerance band in the December quarter.

The central bank has raised the growth forecast for fiscal year 2026-27 to 7.1% and increased the inflation target to 5.2%, resulting in adjustments to key rates like the standing deposit facility (SDF) rate at 5.25% and the marginal standing facility (MSF) rate and Bank Rate at 5.75%.