India’s RBI Raises Rates for First Time Since 2023 as Inflation Rises

India’s return to monetary tightening adds to a global shift toward higher borrowing costs, a backdrop that can pressure emerging-market flows and risk appetite across crypto markets.

The Reserve Bank of India (RBI) raised its benchmark repo rate by 25 basis points to 5.5% on Wednesday, its first increase since 2023. The move brings the policy rate to its highest level in one year.

Retail inflation reached 4.8% in August, exceeding the RBI’s medium-term target of 4%, after rising for 10 consecutive months. The rate increase is intended to contain price pressures as policymakers respond to higher inflation.

India remains one of the world’s fastest-growing major economies, but growth is projected to slow to 7.1% in the financial year ending March 2027, from 7.8% the previous year. The economy expanded 7.8% in the June quarter despite trade uncertainty, geopolitical risks and elevated energy prices.

India is especially exposed to energy disruptions because it imports nearly 85% of its fuel. The country also faces a risk from El Niño, which could add to food-price pressures after an unusually dry June-August period.