RBI MPC minutes: Policy panel signals rate hike risk as inflation rises

The Reserve Bank of India's Monetary Policy Committee (MPC) has signaled a cautious stance on the policy rate, urging close monitoring of inflation before considering any tightening measures. Members of the MPC indicated that if headline inflation peaks at 5.9% in Q3 2026-27, a "case for a hike may emerge" during the year. RBI Governor Sanjay Malhotra expressed preference for waiting for more certainty on inflation trajectory, forecast, and the likely normalisation levels before recalibrating the policy rate.

He also highlighted the need to remain watchful against risks of higher food, fuel, and other input prices leading to a broad-based increase in inflation and eroding expectations. The MPC maintained the repo rate at 5.25% in the policy review, with no immediate scope for further easing. Malhotra noted that inflation has already averaged 3.93% this year, with core inflation projected to average 4.3% in 2026-27.

Deputy Governor Poonam Gupta added that while inflation expectations are contained, a case for a rate hike may emerge due to persistent uncertainty from global developments and weather-related risks. MPC member Ram Singh expressed high uncertainty over monetary policy indicators, urging to retain maximum flexibility to respond to an evolving inflation trajectory.

Saugata Bhattacharya suggested waiting for evidence of further demand pickup and generalisation of price pressures before taking further policy action. MPC member Nagesh Kumar also emphasized extreme caution in a highly uncertain economic environment, urging to watch geopolitical, trade policy, and monsoon trends.