India’s central bank hikes rates for the first time since 2023 as inflation risks build — SkimNews

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- Reserve Bank of India raised the benchmark repo rate by 25 basis points to 5.50%, a one-year high and its first hike since 2023, with Governor Sanjay Malhotra declaring rate cuts are "off the table" and only a hike or pause is possible next
- The monetary policy committee shifted its stance to "calibrated tightening" as retail inflation hit 4.8% in August — above the RBI's 4% medium-term target — marking 10 straight months of rising consumer prices
- HSBC and Goldman Sachs both expect another rate hike at the RBI's December meeting, with HSBC warning that any move perceived as dovish could damage India's appeal to global investors
- The RBI simultaneously raised India's GDP growth estimate by 40 basis points to 7.1% for the fiscal year ending March 2027, even as it flagged that geopolitical tensions, trade frictions, and the Iran war threaten supply chains through which India imports 85% of its fuel via the Strait of Hormuz
- World Bank data flagged an El Niño risk: India had its fourth-driest June–August period since 1960, with officials warning the weather pattern could drive food prices higher and compound inflation
- Indian markets sold off on the decision — the benchmark 10-year government bond yield rose 5 basis points to 7.243% and the Nifty 50 stock index fell 0.7%
- The move places India alongside a global tightening wave: the U.S. Fed, the Bank of Japan (which raised rates to a 31-year high), and the South Korean and European central banks have all hiked in recent months
Why it matters: The RBI is tightening into 7.1% projected GDP growth — not a slowdown — an unusual hawkish-while-bullish stance. The real vulnerability is external: 85% fuel import dependence makes any Iran-driven Strait of Hormuz disruption a direct inflation accelerant, compounded by El Niño food price risks. HSBC and Goldman Sachs are already pricing a December hike, and bond yields jumped while equities fell on the decision.
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