RBI MPC puts Q3 rate hike in play if inflation risks show up big
Indian monetary policy makers may tighten rates in the third quarter if inflation risks materialize. Higher food and fuel prices could lead to broad-based inflation, prompting action. Inflation is projected to peak at 5.9% in Q3 2026-27, signaling potential policy shifts. The central bank remains watchful of global economic turbulence and its domestic impact. Monetary response is warranted if…
India’s monetary policymakers discussed the potential for a third-quarter rate hike during the Reserve Bank of India’s (RBI) August monetary policy meeting. Inflation risks, particularly from rising food and fuel prices, could lead to a broader increase in inflation, prompting monetary tightening. RBI Governor Sanjay Malhotra emphasized that while inflation peaked at 5% in the third quarter of 2026-27, it remains a concern if it translates into a generalised increase.
Deputy Governor Poonam Gupta echoed similar apprehensions, projecting inflation to reach 5.9% in the same quarter. The headline inflation rose to 4.4% in June and 4.5% in July, up from benign levels for 16 months. Despite these concerns, the RBI decided to maintain a neutral stance, keeping monitoring the situation closely.
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