Archive · 19 Aug 2026
RBI Waits on Rate Recalibration Amid Broadening Inflation Risks
India’s central bank is deciding when to change its main interest rate.
Governor Sanjay Malhotra said it is better to wait for clearer evidence about inflation.
He said recent price increases are mostly caused by supply problems.
But higher food, fuel and other costs could spread throughout the economy.
If that happens, the central bank may need to raise rates.
The policy committee kept the rate unchanged at 5.25% and kept its neutral approach.
Some members said India’s economy is growing strongly despite global and weather-related problems.
Other members warned that inflation and outside shocks still need close watching.
The RBI also raised its growth forecast and slightly lowered its inflation forecast.
RBI Governor Sanjay Malhotra said the central bank wants more certainty about inflation before recalibrating the policy rate.
Malhotra warned that broad-based price increases from food, fuel and input costs could require policy tightening.
The MPC kept the repo rate at 5.25% for a fourth consecutive meeting and retained its neutral stance.
Members cited resilience in industrial, services and investment activity despite West Asia conflict, oil volatility, trade uncertainty and agricultural risks.
The RBI raised its FY27 growth forecast to 6.7% and lowered its inflation projection to 5%, while members differed over future risks.
- Who
- RBI Governor Sanjay Malhotra and Monetary Policy Committee members Nagesh Kumar, Indranil Bhattacharyya, Poonam Gupta, Saugata Bhattacharya and Ram Singh.
- What
- The MPC minutes showed a wait-and-watch approach to policy-rate recalibration, while members acknowledged that worsening inflation could require a rate hike.
- When
- The 62nd MPC meeting was held from August 3 to 5, and its minutes were released on Wednesday.
- Where
- Mumbai, India.
- Why
- The RBI is assessing whether supply-driven inflation will persist or broaden, while monitoring oil prices, food costs, global uncertainty, economic growth and agricultural risks.
Inflation-Caution View
Resilient-Growth View
Timing of rate action
Inflation-Caution View
Sanjay Malhotra, Ram Singh and Saugata Bhattacharya called for close monitoring and more evidence before the next policy move, while warning that worsening conditions could require tightening.
Resilient-Growth View
Poonam Gupta said a rate hike could emerge during the year if oil prices and inflationary pressures intensify, while also suggesting growth could outperform the June projection.
Breadth of inflation
Inflation-Caution View
Malhotra and Indranil Bhattacharyya warned that policymakers must watch for supply shocks becoming broad-based and for inflation expectations to become unanchored.
Resilient-Growth View
Malhotra also said elevated inflation was primarily supply-driven and showed limited signs of becoming broad-based; Gupta assessed that inflation could be marginally lower than projected.
Economic outlook
Inflation-Caution View
Saugata Bhattacharya said India’s growth and inflation dynamics remained clouded, and Ram Singh said both fronts required attention amid external shocks.
Resilient-Growth View
Nagesh Kumar and Indranil Bhattacharyya pointed to resilience, sustained industrial and services activity, investment momentum, credit growth, capital expenditure and robust exports.
- Repo rate
- 5.25%, unchanged for the fourth consecutive meeting.
- Policy stance
- Neutral.
- Governor’s view
- Sanjay Malhotra prefers greater certainty about inflation persistence, forecasts and likely normalisation before recalibrating the rate.
- Inflation risk
- Higher food, fuel and input prices could become broad-based and de-anchor inflation expectations.
- FY27 growth forecast
- Raised by the RBI to 6.7% from 6.6%.
- FY27 inflation forecast
- Lowered to 5% from 5.1%.
- Oil-price assessment
- Poonam Gupta said current futures indicated an annual average of about US$90 per barrel.
