Archive · 19 Aug 2026
RBI minutes signal caution as inflation raises hike risk
India’s central bank decided not to change its main interest rate.
The rate will stay at 5.25%.
The bank expects the economy to grow slightly faster than previously predicted.
However, officials are concerned that inflation could rise and reach 5.9% later in the financial year.
They said higher food, fuel and oil prices could make many things more expensive.
Most members wanted to wait and collect more evidence before changing rates.
They also warned that weather, global events and trade problems could affect prices.
If inflation becomes widespread or lasts longer, the bank may consider raising rates.
The MPC kept the repo rate unchanged at 5.25% at its August 5 meeting.
The RBI raised its FY27 growth forecast to 6.7% from 6.6% and lowered its inflation projection to 5% from 5.1%.
Officials said inflation could peak at 5.9% in the third quarter of FY27, potentially creating a case for a rate hike.
Governor Sanjay Malhotra said policymakers should wait for greater certainty about inflation before recalibrating the policy rate.
Members cited food, fuel, oil, weather, geopolitical and other external risks as reasons to preserve policy flexibility.
- Who
- The Reserve Bank of India’s Monetary Policy Committee, including Governor Sanjay Malhotra and other MPC members.
- What
- The MPC kept the repo rate at 5.25% while warning that future inflation could create a case for a rate hike.
- When
- At the MPC meeting held on August 5; the articles do not specify the calendar year.
- Where
- At the Reserve Bank of India’s monetary policy review.
- Why
- The committee wanted to monitor whether higher food, fuel and other input prices become persistent or spread broadly through the economy.
Wait-and-watch approach
Potential need for tighter policy
Immediate policy action
Wait-and-watch approach
Governor Sanjay Malhotra and several members said policymakers should wait for clearer evidence on the persistence and direction of inflation before changing rates.
Potential need for tighter policy
Poonam Gupta said there appears to be no scope for further easing and that a rate hike could become necessary during the year if inflation rises toward its projected peak.
Nature of inflation
Wait-and-watch approach
Malhotra said elevated headline inflation is mainly driven by supply-side shocks, particularly food and fuel prices, while core inflation remains modest and inflation expectations remain contained.
Potential need for tighter policy
Other members warned that higher prices could become broad-based, create second-round effects and cause inflation expectations to become unanchored.
External risks
Wait-and-watch approach
Members including Gupta, Ram Singh and Nagesh Kumar favored preserving flexibility because of uncertainty linked to weather, global developments, oil prices and geopolitical or trade risks.
Potential need for tighter policy
They also said the central bank should be ready to tighten policy quickly if external shocks worsen or price pressures spread widely.
- Repo rate
- 5.25%, unchanged at the policy review
- FY27 growth forecast
- Raised to 6.7% from 6.6%
- FY27 inflation forecast
- Lowered to 5% from 5.1%
- Projected inflation peak
- As high as 5.9% in the third quarter of FY27
- Average inflation last year
- 2%, when the policy rate was brought down to 5.25%
- Projected core inflation
- 4.3% on average in FY27, according to the minutes
- Main risks identified
- Food and fuel prices, global oil prices, weather, geopolitical developments, trade policy and external shocks