RBI raises repo rate to 5.50% as retail inflation hits 5.54%
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims + Mains·
Monetary policy and inflation management: a key GS3 topic regarding RBI's stance on liquidity.
Why in news
The Reserve Bank of India (RBI) shifted its stance to 'calibrated tightening' and raised the repo rate to 5.50% in response to retail inflation hitting 5.54% in September.
Background
The RBI's repo rate increase to 5.50% on October 7 was the first hike since February 2023. Retail inflation reached 5.54% in September, while wholesale inflation hit a series high of 11.39%.
Facts for Prelims
- FactRBI repo rate: 5.50% as of October 7, 2026
- FactRetail inflation: 5.54% in September
- FactWholesale inflation: 11.39% (highest in current series)
- Fact10-year yield: Touched 7.46% on October 23
- BodyJP Morgan added Indian bonds to its emerging market index in June 2024
Prelims practice question
What was the wholesale inflation figure recorded as a series high in the note?
- (a)9.50%
- (b)12.45%
- (c)8.12%
- (d)11.39%
Show answer
Answer: (d) 11.39% — The note states that wholesale inflation hit a series high of 11.39%.
For Mains
Q. Analyze the impact of 'calibrated tightening' by the RBI on the bond market and the disparity between bond yields and bank deposit rates.
Dimensions to cover in your answer
- Monetary transmission lag: Time gap between repo rate hikes and adjustments in bank deposit rates due to liquidity
- Bond price volatility: Inverse relationship between yield spikes and gilt fund returns affecting retail savers
- Inflationary pressure: Impact of high wholesale inflation (11.39%) on central bank's hawkish stance
Keywords: Repo Rate · Calibrated Tightening · Retail Inflation · Bond Yields · Monetary Policy · Liquidity
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This note is generated automatically from SatyaDheesh's news feed and mapped to the UPSC CSE syllabus. Check facts against the original report or PIB before using them in an answer.