The Reserve Bank of India on Wednesday raised its benchmark repo rate by 25 basis points to 5.50 per cent, its first hike in nearly four years, as inflation pressures build.

The six-member Monetary Policy Committee voted unanimously for the increase, Governor Sanjay Malhotra said. The panel also changed its stance from "neutral" to "calibrated tightening", signalling that further hikes are possible if price pressures persist.

The central bank raised its inflation forecast for the year to 5.2 per cent from 5.0 per cent, citing higher oil prices linked to the Iran war and weak monsoon rains. Consumer inflation rose to 4.82 per cent in August, above the RBI's 4 per cent target for the third straight month.

At the same time, the RBI lifted its GDP growth forecast for 2026-27 to 7.1 per cent from 6.7 per cent, pointing to strong economic activity. The economy grew 7.8 per cent in the April-June quarter. Reuters reported that nearly 60 per cent of economists had expected the 25-basis-point increase.