The RBI raised its repo rate by 25 basis points to 5.50% on October 7, its first increase in this cycle, and changed its stance from neutral to “calibrated tightening”. All six members of the Monetary Policy Committee voted for the hike, though two wanted to keep the neutral stance.
What the RBI said
The committee projected inflation at 6% for October to December and 5.7% for January to March. It cited West Asia tensions, volatile crude prices, a weak monsoon and a possible El Niño as risks. It expects the economy to grow 7.1% this year.
The minutes, published on October 21, show the committee saw a hike or a pause as the only near-term options. One external member, Ram Singh, argued for small, gradual increases rather than keeping rates high for long, warning that big hikes could hurt investment, vehicle sales and real estate.
The data since then
September inflation came in at 5.54%, above the RBI’s projection for that quarter. October’s figure, due November 12, will be the last major data point before the committee meets on December 2 to 4.
What it means for borrowers
Most floating-rate home loans are linked to the repo rate, so a hike passes through to EMIs within a quarter. Our explainer in the Money section works through what a 25 basis point rise costs on a typical loan.
