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RBI Delivers First Rate Hike Since 2023 Amid Global Economic Pressures
M
Moneycontrol•07-10-2026, 14:51
RBI Delivers First Rate Hike Since 2023 Amid Global Economic Pressures
- •The Reserve Bank of India delivered a 25 basis point hike in the repo rate, marking the first rate increase since February 2023 as global inflation concerns escalate.
- •Governor Sanjay Malhotra highlighted that second-round effects of inflation are manifesting clearly, with food and fuel price pressures spreading across other segments.
- •The core inflation projection is set at 4.4 percent for FY27, reflecting hardening demand-side pressures and the generalisation of inflation.
- •Analysts expect the current rate hike cycle to be relatively shallow, likely concluding with two more hikes depending on evolving macroeconomic dynamics.
- •The central bank aims to address the colossal liquidity surplus in the economy through various tools, including selling bonds and potential adjustments to the cash reserve ratio.
Key Questions Answered
The Reserve Bank of India implemented a 25 basis point repo rate hike in response to worsening global conditions, including the West Asia conflict escalation, rising bond yields, rampant inflation, and second-round price pressures impacting domestic consumption and growth.
While the central bank has already taken steps such as selling bonds, Governor Sanjay Malhotra stated that additional liquidity tools like the cash reserve ratio and cash management bills are not ruled out to reduce the surplus within the fiscal year.
The RBI projected core inflation at 4.4 percent for FY27, which is slightly higher than estimates from two months prior, reflecting hardening demand-side pressures and the generalisation of inflation across segments.
