India raises interest rates for first time in nearly four years
India's central bank raised its main interest rate by a quarter point to 5.50% on Wednesday, its first hike in nearly four years. All six members of the rate panel voted yes as higher oil and food prices, partly tied to the Iran war, push inflation above target. The bank said rate cuts are off the table for now and more hikes could follow.
India has joined the list of countries raising interest rates to fight rising prices.
The Reserve Bank of India raised its benchmark repo rate by 25 basis points, or a quarter of a percentage point, to 5.50% on Wednesday. The repo rate is what the central bank charges banks for short-term loans, and it shapes what Indian families and businesses pay to borrow. All six members of the bank's Monetary Policy Committee voted for the increase, the RBI said.
The bank also changed its stance from "neutral" to "calibrated tightening." Governor Sanjay Malhotra said that means rate cuts are off the table in the near term, and the next move will be either another hike or a pause. At a press conference, he called it a "milder form of tightening" that depends on the data, Reuters reported.
The main reason is inflation, because higher oil prices tied to the Iran war and weak monsoon rains linked to El Niño have pushed up fuel and food costs, Reuters reported. Consumer prices rose 4.82% in August from a year earlier, above the bank's 4% target for a third straight month. Malhotra said inflation could average almost 5.8% over the next three quarters.
Strong growth is giving the bank room to act, since the RBI now expects the economy to grow 7.1% this financial year, up from its earlier forecast. Growth hit 7.8% in the April-to-June quarter.
The decision marks a sharp turn for the bank, which cut the repo rate to 5.25% in December 2025 and held it there until Wednesday, The Hindu reported. Central banks in other countries, including the U.S. Federal Reserve in September, have also raised rates as oil prices climbed this year.
The rupee is also under pressure, trading near record lows of around 96 to 97 per U.S. dollar. Malhotra said markets can be "irrational" in the short run and that the rupee "might be undervalued," the Economic Times reported.
Economists are split on what comes next. One HDFC Bank economist expects another 50 to 75 basis points in hikes, while a State Street economist sees 100 basis points in total over this cycle.
What we know: India's key rate is now 5.50%, and the bank has stopped talking about cuts.
What we don't: How many more hikes will follow.
Where outlets agree The RBI's own statement, Reuters and The Hindu all report a unanimous quarter-point hike to 5.50% and a shift to a "calibrated tightening" stance.
Where they differ An HDFC Bank economist expects 50 to 75 more basis points of hikes, while Governor Malhotra described the new stance as a milder, data-dependent form of tightening.
That’s the last story in this edition. See every brief from Wed, Oct 7, 2026.