RBI MPC minutes show rate cuts off the table

The minutes of the Reserve Bank of India's October monetary policy meeting show that rate cuts are off the table in the near term, with the six-member Monetary Policy Committee (MPC) unanimous on a 25 basis point rate hike. The MPC minutes, released on 21 October, record the decision taken at the 5-7 October meeting to raise the repo rate to 5.50 per cent, the first increase in nearly four years.

Along with the hike, the committee shifted its policy stance from neutral to calibrated tightening. RBI Governor Sanjay Malhotra said the new stance was, in his words, "essentially signalling that rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause, depending on the evolving circumstances and the outlook." The next meeting is scheduled for 2-4 December.

MPC minutes show a unanimous rate vote

All six members of the committee voted for the 25 basis point increase in the repo rate. The MPC minutes show that two members, Dr Nagesh Kumar and Professor Ram Singh, supported the hike but preferred to keep the neutral stance. Under the calibrated tightening stance, the standing deposit facility rate stands at 5.25 per cent, while the marginal standing facility rate and the Bank Rate were adjusted to 5.75 per cent.

Malhotra said the duration and extent of any further rate hiking cycle would depend on incoming data. In the MPC minutes, he said it would be "contingent on the actual growth and inflation developments and outlook, especially that of underlying inflation, the broadening of price pressures, second round effects of the supply shock, and the impact of demand impulses." That points to a pause or another hike, rather than a cut, as the next move.

MPC minutes flag broadening inflation

The MPC minutes record growing signs that price pressures are spreading across goods. Malhotra noted that 37 per cent of commodities in the consumer price index basket recorded inflation above 4 per cent in August, compared with 20 per cent in March. Core inflation rose to 4.2 per cent in August from 3.9 per cent in July, while core inflation excluding precious metals increased to 2.9 per cent. The Reserve Bank has projected core inflation at 4.4 per cent for the current financial year.

Headline consumer inflation is projected to touch the upper tolerance band in the third quarter of FY27 and remain significantly above 5 per cent in the following two quarters, according to the committee's assessment. Consumer inflation reached 5.54 per cent in September, moving closer to the upper edge of the Reserve Bank's tolerance band. The September household survey showed that the median inflation expectation for the next three months had jumped to 9.9 per cent.

MPC member and RBI Deputy Governor Poonam Gupta said inflation is mostly driven by external supply-side shocks, with little sign of it becoming entrenched or affecting inflation expectations. The minutes also note that higher crude oil prices and uncertainty around the West Asia conflict have added to the inflation outlook, while energy prices and supply chain pressures continue.

MPC minutes and the growth outlook

The minutes put growth for 2026-27 at 7.1 per cent, 40 basis points above the August estimate. Malhotra said the Indian economy has shown resilience amid a turbulent global backdrop, even as global economic uncertainty continues to bear on domestic activity. The MPC minutes also flag risks from a deficient southwest monsoon and strong El Nino conditions for agriculture and rural demand, while noting that a healthy buffer of foodgrains and policy action are expected to soften the impact.

Services momentum and broadly stable employment conditions are likely to support urban demand, the MPC minutes say. Strong capacity utilisation, credit flows and the government's infrastructure push are expected to sustain investment activity. Services exports are expected to stay buoyant, and bilateral trade agreements should boost merchandise exports. The MPC minutes close the growth discussion with that assessment, and the committee's next decision is due in December.