Reserve Bank of India raises repo rate to 5.5%

The Reserve Bank of India (RBI) has implemented a 25 basis point increase to the policy repo rate, bringing it to 5.5%. This marks the first rate hike in 44 months, shifting the central bank's stance from neutral to calibrated tightening in response to global uncertainties and crude oil price volatility.

Goldman Sachs economist Santanu Sengupta projects that the RBI may implement three additional rate hikes by June 2027, totaling approximately 75 basis points. These potential increases are expected in December, February, and either April or June. Sengupta noted that while India is expected to maintain roughly 7% economic growth, El Nino poses a significant risk to the rabi harvest and could drive inflation higher by 2027.

Despite these risks, domestic economic momentum remains resilient. The RBI has projected real GDP growth of 7.1% for 2026-27, supported by private consumption, investment, and robust manufacturing and services activity.