The Reserve Bank of India (RBI) has raised the repo rate by 25 basis points to 5.5 per cent, with the Monetary Policy Committee (MPC) unanimously voting in favour of the hike.
The MPC has also changed its policy stance to calibrated tightening. RBI Governor Sanjay Malhotra has indicated that rate cuts are off the table in the near term. The next move will either be another rate hike or a pause, depending on how the economy and inflation unfold.
The RBI will assess growth, underlying inflation and the spread of price pressures before deciding on further action. It will also watch how supply shocks impact prices and trigger a second round of inflation.
For borrowers, the rate hike could mean higher interest costs if banks raise lending rates on loans linked to the repo rate.
