The Monetary Policy Committee voted unanimously to lift the policy repo rate by 25 basis points and shifted its stance to calibrated tightening.
The Reserve Bank of India's Monetary Policy Committee voted unanimously on Wednesday to raise the policy repo rate by 25 basis points to 5.50 percent, Governor Sanjay Malhotra said. The standing deposit facility rate moves to 5.25 percent, and the marginal standing facility rate and the bank rate to 5.75 percent.
The committee, meeting from 5 to 7 October, also changed its stance to calibrated tightening. Malhotra said that signal means rate cuts are off the table in the near term and that the next move can only be a further hike or a pause. It is the first increase since he took office in December 2024, and the first repo-rate rise in nearly four years.
The MPC said headline inflation is no longer as benign as last year. In the governor's statement, CPI inflation is expected to average almost 5.8 percent over the next three quarters, with core inflation projected at 4.4 percent this financial year. The resolution projects real GDP growth for the year at 7.1 percent.
Malhotra also said financial markets can be irrational in the short run and that several measures suggest the rupee may be undervalued, Reuters reported from his remarks. Brent crude was near 102 dollars a barrel on Wednesday, ET Now said, as oil remains a pressure point for imported inflation.
Indian equities closed lower after the decision. ET Now reported the Sensex down 429.11 points, or 0.59 percent, at 72,638.70, and the Nifty 50 down 173.05 points, or 0.76 percent, at 22,603.05. The RBI figures are the official resolution; the market closes are from the exchange-reported session.
People Sentiments Negative
- Malhotra said rate cuts are off the table in the near term.
- He said several measures suggest the rupee may be undervalued.
- The MPC said inflation and its outlook are not as benign as last year.