- Members of RBI's MPC signal limited scope for further monetary easing in 2026
- RBI Deputy Governor Poonam Gupta highlights inflation near 6% in Q3 as a concern
- RBI Governor Sanjay Malhotra notes inflation normalization and possible rate recalibration
Members of the Reserve Bank of India's Monetary Policy Committee are signalling that the space for further monetary easing is narrowing, with some members seeing a case for a rate hike in 2026 as inflationary pressures build.
MPC member and RBI Deputy Governor Poonam Gupta said there was little scope for further easing considering headline inflation will likely touch near 6% mark in Q3, and that a case for raising the policy rate could emerge during the year, according to the minutes of the August policy meeting released on Wednesday.
The comments come even as the MPC unanimously kept the repo rate unchanged at 5.25% in its August meeting and retained its neutral stance.
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RBI Governor Sanjay Malhotra said the normalisation of inflation from the exceptionally benign levels seen earlier has begun. Average CPI inflation was around 2% last year, while inflation has averaged 3.93% so far this year, highlighting the sharp change in the inflation trajectory.
Malhotra also flagged the possibility that the policy rate may need to be recalibrated if inflationary pressures become more persistent. The RBI has projected core inflation at 4.3% for FY27, while headline CPI inflation is expected to rise to around 5.9% in the third quarter, according to the MPC projections.
Gupta's assessment was more hawkish, with her view suggesting that the current inflation outlook does not leave much room for another rate cut. She also pointed to elevated crude oil prices as a key risk to the inflation trajectory.
MPC member Saugata Bhattacharya warned that persistently high fuel prices could have second-round effects on inflation by feeding into input costs and broader price pressures.
The MPC's comments underscore the shift in the policy debate-from whether the RBI can continue easing rates to when it may need to consider policy normalisation or tightening. The central bank, however, has maintained that greater clarity on the persistence and trajectory of inflation would be necessary before any policy rate adjustment.
The August MPC had projected FY27 headline inflation at 5%, while raising its GDP growth forecast to 6.7%.
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