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RBI raises repo rate 25 bps to 5.5%, first hike since February 2023, as inflation risks broaden
Our read
RBI's first hike since February 2023 is more likely a one-off than the start of a cycle, but financing costs will weigh on rural-exposed and EMI-dependent retail while urban demand holds.
For operators
With the repo rate up 25 bps to 5.5% and CPI expected to average nearly 5.8% over the next three quarters, expect higher inventory-financing and input costs, so lean on urban-demand categories and keep rural stock cautious given the El Niño risk.
Watch
The next monthly CPI print against the 4.8% August reading, and whether core moves above 4.2%
The report,
RBI said CPI inflation rose to 4.8 per cent in August, with food price pressure becoming broader. It flagged El Niño risk to rural demand, while urban demand is seen supported. The MPC also shifted its stance to calibrated tightening.
- Repo rate after hike
- 5.5 per cent
- up 25 basis points
- CPI inflation in August
- 4.8 per cent
- Average CPI inflation, next three quarters
- nearly 5.8 per cent
- FY27 real GDP growth projection
- 7.1 per cent
Reported figures
From the report. Source details below
| Average CPI inflation over next three quarters: | nearly 5.8 per cent |
|---|---|
| Core inflation in August: | 4.2 per cent |
| FY27 real GDP growth projection: | 7.1 per cent |
| Q1 real GDP growth: | 7.8 per cent |
| Account Aggregator interoperability deadline: | December 31, 2026 |
Why it matters to operators
A repo rate of 5.5% and inflation risks that RBI sees broadening mean higher financing costs and hurdle rates for deals, so prioritise cash-generative, urban-weighted targets and test valuations against a tighter rate path.