RBI raises the repo rate to 5.50% and turns to 'calibrated tightening'. The rupee still slides to 96.78 and the Sensex sheds 429 points
The six-member Monetary Policy Committee raised the repo rate by 25 basis points to 5.50 per cent on Wednesday and shifted its stance from neutral to calibrated tightening. It is the first hike since February 2023 and ends a hold at 5.25 per cent. Governor Sanjay Malhotra said the next step is only a hike or a pause. The RBI projected 2026-27 CPI inflation at 5.2 per cent (quarterly path 4.9, 6.0 and 5.7 per cent for Q2 to Q4), citing a weak monsoon, El Niño and energy costs, and raised the 2026-27 growth forecast to 7.1 per cent from 6.7 on the back of 7.8 per cent growth in April–June. The Sensex closed at 72,638.70 (down 0.59 per cent) and the Nifty at 22,603.05 (down 0.76 per cent). The rupee closed at 96.78 per Business Standard (96.75 per PTI), the weakest close since 20 May.
A rate hike is meant to steady the currency and cool prices. That the rupee fell after it shows how much of the pressure comes from oil and foreign selling that interest rates cannot easily offset. The reserves the RBI spent defending the rupee are now falling fast.
Floating-rate home and car loan EMIs will rise, or the tenure will lengthen. Fixed deposit rates should edge up over coming weeks. Importers and students paying fees abroad face a dearer dollar.
The RBI acted early, before inflation became entrenched. The new stance and a Governor who rules out cuts give the rupee a floor in credibility.
A hike into a slowing economy, with oil as the real culprit, risks hurting growth while barely moving the rupee. The Hindu notes that the government, not the RBI, must now do the heavy lifting on prices.
The sentence to hold is 'a hike or a pause'. It tells you the RBI has stopped easing for the cycle, whatever oil does. The rupee's test is 96.97, the record low. If it breaks that even after a hike, the next debate will be on reserves, not rates.
DailyDrop India edition No. 3 · Morning · WED., OCT. 7, 2026