The Reserve Bank of India’s decision to raise the repo rate by 25 basis points to 5.50% comes down to three broad shifts in the macroeconomic picture. The country's growth has held up better than expected, inflation risks are building again and the global interest-rate environment is making it harder for India to maintain a wide policy gap.
The rate hike marks the first increase since February 2023, when it stood at 6.6%, and a reversal from the RBI’s rate-cut cycle, with the central bank now having greater confidence that the economy can absorb some monetary tightening without a significant hit to growth.
