RBI MPC Minutes Analysis of the October 2026 Meeting

A 25-BPS RATE HIKE AND MORE

When the RBI policy was presented by the MPC on October 07, 2026, it hiked rates by 25-bps to 5.50%, and changed the stance to “Calibrated tightening.” There was also a 40-bps upward revision to GDP growth estimates for FY27, and a 20-bps upping of the inflation for the fiscal. The tone of the policy hinted at another possible rate hike in December 2026.

The October monetary policy came at a crucial juncture. CPI and WPI inflation continued to increase on a persistent basis. In a similar situation, the US Federal Reserve had already hiked the Fed rates by 25 bps, leaving little room for India to manoeuvre. After all, the rupee had been under pressure despite the $133 billion of inflows through the FCNR(B) window.

The decision to raise the repo rates by 25 bps was unanimous with all the six members voting in favour. However, only 4 out of the 6 members voted in favour of shifting the stance of the policy to “Calibrated Tightening.” Dr Nagesh Kumar and Prof Ram Singh were of the view that the stance of the monetary policy should be retained at “Neutral.”

NAGESH KUMAR FOCUSED ON INFLATION MANAGEMENT

According to Dr Nagesh Kumar, the robust GDP numbers, positive high-frequency growth signals, and persistent runaway inflation provided the perfect backdrop for a rate hike. He also underlined the rupee weakness as a key reason to raise rates by 25 bps. However, considering the geopolitical risks and trade uncertainty, he felt it would be appropriate to keep the stance of the policy at “Neutral” for now. According to Nagesh Kumar; crude prices, imported inflation, and deficient monsoons were the key inflation drivers.

The Vote: Nagesh Kumar felt that the combination of robust GDP growth and high inflation provided the right combination to signal the seriousness of RBI with a rate hike. He felt that due to macro uncertainties, the policy stance can be continued at “Neutral.”

SAUGATA BHATTACHARYA FOCUSES ON POLICY CONVERGENCE

Saugata Bhattacharya emphasized that the global trend was towards a hawkish monetary policy. Apart from the US Fed, central banks of the EU, Japan, Australia, and New Zealand had hiked rates. RBI had to ensure that monetary divergence was kept to the bare minimum. Bhattacharya also pointed to the fact that the monthly current account deficit data showed a worsening of the metrics compared to last year. That was weakening the Indian rupee and a rate hike would send the right signal to the market.

The Vote: Bhattacharya voted to hike rates by 25 bps. In addition, he also voted for shifting the stance of the policy to “Calibrated Tightening”, as an alternative to a 50-bps rate hike. That would prepare the markets for more hawkishness from the RBI.

RAM SINGH CAUTIONS ON CORE INFLATION RISKS

Prof Ram Singh underlined that the real inflation story to worry about was the core inflation (inflation net of food and fuel). Core inflation is structural and hence less cyclical. The core inflation in India had spiked to above 4.2% due to a combination of the supply chain constraints created by the war and the resultant spike in input costs. Also, the inflation expectations had gone up, making it almost inevitable for the RBI to hike rates to send the signal that it was serious about price stability.

The Vote: Ram Singh voted for a 25-bps rate hike to contain inflation. However, considering the dual impact of high inflation and weak currency, he felt it would be better to retain the stance of the monetary policy at “Neutral” and take the data as it comes.

INDRANIL BHATTACHARYA WORRIED ABOUT INFLATION STRUCTURE

According to Dr Indranil Bhattacharya, the real concern was inflation averaging above 5.8% in the previous 3 quarters. He also underlined that the number of items in the CPI basket experiencing inflation above 6% had increased substantially. His view is that it is better to act in a pre-emptive manner by acting to curb inflation and also cautioning the market about more such action. He underlined that a dual thrust from the RBI would bring the focus on the RBI commitment to curtail inflation at all costs.

The Vote: Indranil Bhattacharya voted in favour of a 25-bps rate hike and shifting the policy stance to “Calibrated Tightening” as it would send the right signal to the market that there were only 2 choices going ahead; status quo or a rate hike. Rate cuts were off the agenda.

POONAM GUPTA WARNS OF BREACHING INFLATION BANDS

According to Poonam Gupta, RBI credibility is all about respecting the 2% to 6% inflation band. With the rates likely to go above 6% in the coming months, the RBI has to prepare the markets for more hawkishness. That will also underline its commitment in no uncertain terms. RBI has to also prepare the markets for another rate hike, although there was no certainty. Hence, rather than hike rates by 50 bps, a better option would be to combine with a change in the stance of the policy as a clear hawkish directional signal.

The Vote: According to Poonam Gupta, the 25-bps rate hike was inevitable and a shift in stance from Neutral to Calibrated Tightening would send the right message to consumers that the RBI was totally committed to containing inflation, above all else.

RBI GOVERNOR UNDERLINES NEED FOR FLEXIBLE APPROACH

RBI Governor has repeatedly spoken about the need for a more flexible and data-driven approach to monetary policy. He underlined that the role of monetary policy was to limit the second-round effects of a supply shock. He also added that with the spike in deposits due to the FCNR(B) swap deluge, we could see a surge in consumer credit, which could also provide a demand boost to inflation. It was essential to show that the RBI was prepared and committed to taking all possible steps to ensure price stability.

The October 2026 monetary policy minutes show that this may be the first in a series of rate hikes by the RBI. Markets are of the view that the RBI will restrict itself to another 25 bps in December and await data flows after that. That would already be 60 bps above the pre-pandemic repo rate.