Mumbai: The Reserve Bank of India could raise its benchmark interest rate two more times, and possibly a third, according to the minutes of its October monetary policy meeting, which signalled a bias toward further tightening.
The Monetary Policy Committee voted unanimously to raise the repo rate by 25 basis points to 5.50 per cent on October 7, its first increase in nearly four years, and shifted its stance from neutral to 'calibrated tightening'. The Standing Deposit Facility rate was raised to 5.25 per cent, while the Marginal Standing Facility rate and the bank rate stayed at 5.75 per cent.
Governor Sanjay Malhotra said at the time that rate cuts were off the table in the near term and that the next move could only be a hike or a pause. The minutes now point to how many hikes members see ahead.
The committee raised its FY27 inflation forecast to 5.2 per cent from 5 per cent and said it expected CPI inflation to average 5.8 per cent over the next three quarters. It also lifted its FY27 real GDP growth projection to 7.1 per cent from 6.7 per cent, pointing to resilience in domestic activity.
The policy turn comes as elevated crude prices, higher global bond yields and a weaker rupee narrow the room for accommodation. Food prices have also firmed.
For borrowers, the signal matters. Lenders price new loans off the repo rate, and further hikes would raise equated monthly instalments on fresh home and vehicle loans, as well as corporate borrowing costs.
The next policy decision will be watched for whether the committee pauses or follows through.