RBI Raises Repo Rate To 5.50 percent, Signals Calibrated Tightening Amid Inflation Risks

RBI Raises Repo Rate To 5.50 percent, Signals Calibrated Tightening Amid Inflation Risks

 By Umesh Sharma, CIO – Debt, The Wealth Company Mutual Fund

“ The RBI raised the repo rate by 25 bps to 5.50% and changed its stance to calibrated tightening, with the Governor saying rate cuts are off the table for now. This was the first hike since February 2023. The RBI raised its FY27 growth forecast to 7.1% and inflation forecast to 5.2%, while core inflation is now seen at 4.4%. The move came as oil prices rose above $100, the monsoon was weak and global central banks tightened. The rate hike was expected, but the stance change was a mild surprise. The 10-year G-Sec yield rose 3-4 bps, and shorter-term yields rose 5-10 bps. We expect 2-3 more hikes in this cycle, as inflation is above target and global yields keep rising. Each policy meeting remains live. We continue to expect accrual strategies to perform well under these conditions, however investors with longer time horizon could look to add duration to their portfolio in a staggered manner “