RBI raises interest rates by 25 bps to combat inflation; shifts to ‘calibrated tightening’
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims + Mains·
Monetary policy and inflation management: a key GS3 topic regarding RBI's stance and GDP projections.
Why in news
The Reserve Bank of India's Monetary Policy Committee (MPC) raised interest rates by 25 bps and shifted its stance to 'calibrated tightening' to combat rising inflation.
Background
The MPC projected retail inflation at 4.9% in Q2, 6% in Q3, and 5.7% in Q4 of 2026. The RBI revised the 2026-27 GDP growth forecast upwards from 6.7% to 7.1%.
Facts for Prelims
- FactRBI raised interest rates by 25 bps in October 2026.
- FactMPC shifted policy stance from 'neutral' to 'calibrated tightening'.
- FactProjected retail inflation for Q3 2026 is 6%.
- FactRevised GDP growth forecast for 2026-27 is 7.1%.
- FactGlobal oil prices crossed $100 a barrel as of October 2026.
Prelims practice question
What is the revised GDP growth forecast for 2026-27 as projected by the RBI?
- (a)8.2%
- (b)7.5%
- (c)6.7%
- (d)7.1%
Show answer
Answer: (d) 7.1% — The RBI revised the 2026-27 GDP growth forecast upwards from 6.7% to 7.1%.
For Mains
Q. Discuss the limitations of monetary policy in controlling inflation driven by supply-side shocks like crude oil prices and monsoon-related food shortages.
Dimensions to cover in your answer
- Monetary policy transmission: Challenges in curbing inflation when primary drivers are supply-side shocks rather than demand-pull.
- Inflation expectations: The role of central bank signaling in preventing self-fulfilling inflationary prophecies.
- Fiscal-Monetary coordination: Pressure on oil marketing companies to absorb costs vs. the necessity of interest rate hikes.
Keywords: Monetary Policy Committee · Calibrated Tightening · Supply-side Inflation · Inflation Expectations · GDP Growth Forecast
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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.