More RBI rate hikes coming, SBI wants ‘jumbo’ 50 bps increase by December. Read the key points, why it matters and what businesses should watch next.
Rate Panel Lifts Repo Rate To 5.5%
The Reserve Bank of India's Monetary Policy Committee has begun tightening, raising the repo rate by 25 basis points to 5.5% — its first increase in more than three and a half years. The panel also shifted its stance from 'neutral' to 'calibrated tightening', signalling that rate cuts are ruled out for now and that future action will be either a hike or a pause.
The MPC revised its inflation projection for the current fiscal year to 5.2%, up from 5%, and expects consumer price inflation to average around 6% in the October–December quarter. It observed some evidence of elevated inflation expectations and a generalisation of price pressures, a change from its August assessment that such signs were limited.
Where Economists Stand
State Bank of India's Group Chief Economic Adviser, Soumya Kanti Ghosh, has called for a larger 50-basis-point increase, either at the December 2–4 meeting or earlier, arguing that volatile global conditions make small, staggered moves less effective. SBI expects headline retail inflation to peak at 6.8% in November, with that data due roughly a week after the next policy decision.
Most economists surveyed, however, expect two further hikes of 25 basis points each over about six months, taking the repo rate to 5.75% in December. HSBC economists led by Pranjul Bhandari foresee only one more 25-basis-point increase this year, noting that rate rises appear aimed at lowering inflation rather than defending the rupee. A smaller group expects another 75–100 basis points of tightening. Bandhan Mutual Fund's Suyash Choudhary estimates total hikes of 100–125 basis points, including Wednesday's move, citing an exceptionally hawkish global environment.
Why It Matters For Business
A rising repo rate raises the cost of bank borrowing, which typically feeds into working capital loans, term debt and fresh project financing. Companies with floating-rate exposure may see interest outgo rise as lenders reprice loans. Tr…
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