At its October meeting, the Reserve Bank of India (RBI) raised its key repo rate by 25 basis points to 5.50%, the first increase since February 2023. The move came amid a weakening rupee and followed rate hikes by several major central banks, including the US Federal Reserve. It was broadly in line with market expectations, against a backdrop of conflict in the Middle East and heightened global uncertainty that is adding to inflationary pressures.
India’s annual inflation rate rose to 4.82% in August 2026, the highest since December 2024 and above the RBI’s 4% target for the third consecutive month, though it remained within the central bank’s 2%–6% tolerance band.
Despite the inflation concerns, the RBI turned more optimistic on growth, lifting its GDP forecast for FY2026/27 to 7.1% from 6.7%. It now projects headline inflation to average 5.2%, up from 5.0% previously, and core inflation to average 4.4%, slightly higher than the earlier forecast of 4.3%.
In line with the repo rate increase, the RBI also raised the Standing Deposit Facility (SDF) rate to 5.25% and the Marginal Standing Facility (MSF) rate to 5.75%.
