The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday unanimously raised the repo rate by 25 basis points to 5.5 percent, its first increase since February 2023, while changing its policy stance from ‘neutral’ to ‘calibrated tightening’. The RBI raised its FY27 GDP growth forecast sharply to 7.1 percent from 6.7 percent, but also increased its CPI inflation projection to 5.2 percent from 5 percent amid supply-side pressures. Governor Sanjay Malhotra said rate cuts are off the table in the near term as the central bank navigates higher commodity prices, crude oil volatility and global economic uncertainty.
RBI hikes repo rate to 5.5 percent, first increase since February 2023: The MPC unanimously voted to raise the policy repo rate by 25 basis points to 5.5 percent, ending a run of 21 consecutive policy meetings without a rate increase. The Standing Deposit Facility rate has accordingly been adjusted to 5.25 percent, while the Marginal Standing Facility rate and bank rate have been raised to 5.75 percent.
Policy stance changed to ‘calibrated tightening’; rate cuts off the table: The MPC changed its monetary policy stance from ‘neutral’ to ‘calibrated tightening’, with four of the six MPC members voting in favour of the change. Governor Sanjay Malhotra said the MPC underscored that rate cuts are off the table in the near term, signalling a clear shift in the direction of monetary policy.
RBI raises FY27 GDP growth forecast to 7.1 percent: The central bank raised its FY27 real GDP growth projection to 7.1 percent from 6.7 percent earlier, after the economy expanded 7.8 percent in the first quarter. The RBI now expects GDP growth of 7.2 percent in Q2, 6.9 percent in Q3 and 6.8 percent in Q4. Growth in Q1FY28 is projected at 7.1 percent. Malhotra said domestic economic activity has remained resilient amid global headwinds, although those headwinds could weigh on the outlook going forward.
FY27 inflation forecast raised to 5.2 percent: The RBI increased its FY27 CPI inflation projection to 5.2 percent from 5 percent earlier. CPI inflation is projected at 4.9 percent in Q2, 6 percent in Q3 and 5.7 percent in Q4, while inflation in Q1FY28 is seen at 5.6 percent. The RBI said risks to its inflation forecasts are evenly balanced.