The Reserve Bank of India has raised its benchmark repo rate by 25 basis points to 5.5%, marking its first rate increase in nearly four years. The decision was taken unanimously by the six-member Monetary Policy Committee, which also shifted its policy stance from neutral to calibrated tightening.
The rate increase comes as inflationary pressures have strengthened, partly due to higher oil prices linked to the Iran conflict and the impact of weak monsoon conditions. Consumer inflation reached 4.82% in August, remaining above the RBI’s 4% target for the third consecutive month.
Despite the tighter policy stance, the central bank continues to see resilience in the Indian economy. GDP growth reached 7.8% in the April-June quarter, above the RBI’s earlier forecast of 7%. The policy decision is therefore aimed at balancing growth with the need to contain inflationary risks.
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