RBI MPC: Repo rate hiked by 25 bps to 5.5%, rate cut unlikely in near term

Reserve Bank of India (RBI) governor Sanjay Malhotra on Wednesday announced that the policy repo rate has been hiked by 25 basis points to 5.5%. The MPC decided in favour of increasing the repo rate unanimously, he added.

RBI Governor Sanjay Malhotra also announced that the Monetary Policy Committee (MPC), which met from October 5-7, shifted its stance from neutral to calibrated tightening by a majority of 4-2.

"After a detailed assessment of the evolving macroeconomic and financial conditions, developments and the outlook, the MPC voted unanimously to increase the policy repo rate under the LAF by 25 basis points to 5.5 per cent. Consequently, the SDF rate stands adjusted at 5.25 per cent and the marginal standing facility rate and the bank rate to 5.75 per cent," the RBI Governor said.

The RBI boss underscored that any rate cut is unlikely in the near term given current conditions. He further said that going ahead, a policy action can only be either a rate hike or a pause.

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First repo rate hike after 2023

The hike comes after the central bank maintained a status quo on the repo rate at 5.25% in its last four reviews. After delivering a cumulative 125-basis-point rate cut in 2025, the RBI held the repo rate steady at 5.25% across four consecutive MPC meetings.

Before 2025, the last repo rate hike was in February 2023, when the central bank raised the rate by 25 bps to 6.50%. It kept the rate unchanged through 2023-24 before starting its rate cut cycle in 2025.

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What the experts said on repo rate hike

Nirmal K Minda, President, ASSOCHAM said that a 25 bps increase in repo rate would lead to rise in borrowing costs, which could have some impact on consumption and can moderate fresh investments and expansion plans, especially for interest-sensitive MSMEs and sectors dependent on credit demand.

"At the same time, the impact is likely to be gradual rather than immediate, as monetary policy transmission takes time," said Minda.

Praveen Jain, President, NAREDCO said, “The festive season is a very important period for the real estate sector, and stability in interest rates during this period remains positive for homebuyers. However, it is also important to control inflationary pressures and maintain stability in the economy. In this context, the 25 bps increase in the repo rate should be viewed in the context of the broader economic conditions. Housing demand remains strong at present. We expect the impact of this increase on the residential market to remain limited, supported by strong buyer sentiment, festive demand and the long-term need for homeownership. The real estate sector will continue to demonstrate strength and resilience in maintaining its current momentum.”

Commenting on the RBI Monetary Policy, Garima Kapoor, Deputy Head of Research and Economist at Elara Capital said, "Continuing commodity prices pressures are likely to put upside pressure on inflation as growth remains resilient allowing quick pass-through of input prices to retail prices. The rising interest rate backdrop globally has also reduced RBI's degrees of freedom. We see likelihood of another 50 bps hike this cycle."