RBI minutes: all six MPC members backed October repo rate hike
The minutes of the Reserve Bank's 5–7 October meeting show a unanimous vote for a 25 basis point rise to 5.50 per cent, with two external members objecting only to the change in stance.
The Global Sun Desk ·
All six members of the Reserve Bank of India's Monetary Policy Committee voted to lift the repo rate by 25 basis points, taking it to 5.50 per cent, at their 5–7 October meeting, the minutes released on Wednesday, 21 October, show. Two external members, however, would have kept the policy stance neutral instead of moving it to "calibrated tightening".
The repo rate rose from 5.25 per cent. The standing deposit facility rate moves to 5.25 per cent, while the marginal standing facility rate and the Bank Rate are both 5.75 per cent. According to PTI, it was the first increase in nearly four years. According to the minutes, the new stance rules out rate cuts for the time being; the next move can only be a hike or a pause.
Where members differed
Nagesh Kumar and Ram Singh voted for the hike but preferred to leave the stance neutral. Singh wrote that he did "not favour shifting the stance from neutral to tightening mode". Kumar pointed to geopolitical and trade uncertainty.
Governor Sanjay Malhotra, who chaired the meeting, voted for the hike. PTI reported that he said the length and extent of the cycle would depend on how growth and inflation develop. Deputy Governor Poonam Gupta, who is in charge of monetary policy, saw the current rise in prices as chiefly a product of supply shocks from abroad, with scant sign so far of it taking root or shifting expectations. Even so, with forecasts pointing to inflation touching the 6 per cent ceiling of the tolerance band, she said the committee should not wait for firmer proof, since policy works with a lag.
Executive Director Indranil Bhattacharyya wrote that it was better to set aside the "cautiousness bias" and act pre-emptively. External member Saugata Bhattacharya cited upside risks to inflation and said price pressures were becoming entrenched.
The numbers behind the vote
The minutes record consumer price inflation of 4.8 per cent in August and core inflation of 4.2 per cent. Price rises are also spreading: in August inflation exceeded 4 per cent for 37 per cent of CPI items, against 20 per cent in March, PTI reported from the minutes. Wholesale input prices were rising at close to 9 per cent a year.
Retail inflation has since climbed to 5.54 per cent in September, driven by onions and other food items, which is still inside the RBI's tolerance band of 2 to 6 per cent around its 4 per cent target.
The central bank projects consumer price inflation of 5.2 per cent for 2026–27, and real GDP growth of 7.1 per cent. Growth was 7.8 per cent in the April–June quarter. The committee described the economy as strong and resilient, but called the global backdrop challenging because of geopolitical developments.
The committee's next meeting is scheduled for 2–4 December. By then the October inflation reading, due on 12 November, will be available to its members.