The Reserve Bank of India raised the repo rate to 5.5 per cent on October 7, its first hike in nearly four years. Here is what the decision means for borrowers, savers and the economy.

The repo rate is the rate at which the RBI lends to banks. When it rises, banks typically raise interest rates on home, car and personal loans. New borrowers will pay more in monthly instalments, and existing floating-rate loans may get costlier.

Why did the RBI act? Consumer inflation hit 4.82 per cent in August, above the 4 per cent target for a third straight month. Higher oil prices linked to the Iran war and a weak El Nino monsoon have pushed up food and fuel costs.

The central bank also changed its stance to "calibrated tightening", signalling that more hikes are possible if inflation stays high. It raised its FY27 inflation forecast to 5.2 per cent.

For savers, the news is better: fixed deposit and bond rates may rise. Markets fell on the news, with the Nifty dropping 0.6 per cent, as investors adjusted to the end of the rate-cut cycle.