India's central bank increased the key repo rate by 35 basis points on Wednesday, the fifth consecutive rise.

The monetary policy committee (MPC), which includes three members from the Reserve Bank of India (RBI) and three external members, hiked the key lending rate to 6.25% as five of the six members voted in favour of the rise.

India's annual retail inflation declined to a three-month low in October of 6.77%, bolstered by a slower increase in food prices and a higher base effect, fuelling bets of smaller future rate hikes by the central bank, Reuters reports.

However, RBI governor Shaktikanta Das said the principal risk was that inflation could remain high.

"The MPC was of the view that further calibrated monetary policy action was warranted to keep inflation expectations anchored, breakcore inflation persistence and contained second-round effects," Das stated.

"The focus on inflation control continues. There will be no let up in our efforts to bring inflation to more manageable levels," he added.

Investors forecast another increase at the bank's next meeting.

"The statement was slightly more hawkish than perhaps expected by markets, with no indication that the central bank is coming to the end of its rate hiking cycle for now," said Sakshi Gupta, principal economist at HDFC Bank.

In addition, the MPC reduced its GDP growth forecast for 2022/23 from 7% to 6.8% whilst maintaining the retail inflation forecast steady at 6.7%.

"Growth in India remains resilient in the international environment. A 6.8% growth (rate) is robust," the RBI governor stated.

In Q3, India registered annual economic growth of 6.3%, marginally higher than forecast but under half of the 13.5% growth in Q2.

The Rupee fell against the Dollar following the policy decision announcement, whilst government bond yields increased.