RBI minutes reveal split over rate hikes, with inflation risks mounting

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Policymakers remain divided over the pace of monetary tightening as rising consumer prices, currency weakness and supply-side risks complicate the outlook

By Bloomberg

Updated - October 22, 2026 at 09:52 AM.

FILE PHOTO: Reserve Bank of India Governor Sanjay Malhotra favoured a data-dependent approach to further rate hikes as policymakers assessed rising inflation risks. | Photo Credit: FRANCIS MASCARENHAS

Indian policymakers agreed inflation had worsened enough to warrant higher interest rates, but differed over how much more tightening may be needed, minutes of the central bank’s October meeting showed.

Reserve Bank of India Governor Sanjay Malhotra sought to keep the path ahead data-dependent after the six-member monetary policy committee lifted interest rates earlier this month, according to minutes released Wednesday.

RBI signals data-dependent approach to rate hikes

“The extent and duration of the tightening cycle would depend on how growth and inflation evolve,” Malhotra said, proposing a change of stance to ‘calibrated tightening’ from neutral. The move signals “that rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause, depending on the evolving circumstances and the outlook.”

Others, such as Deputy Governor Poonam Gupta and Executive Director Indranil Bhattacharyya, made a stronger case for staying ahead of inflation after the committee lifted the benchmark rate for the first time in nearly four years to 5.5%.

Gupta said policymakers shouldn’t wait for definitive evidence that price pressures are broadening, given the lagged impact of monetary policy, and that another rate increase may be needed to keep inflation expectations anchored.

“The pace, extent, and duration of such actions would depend on the incoming data on inflation, its diffusion, and evidence of second-round effects,” she said.

The RBI’s October hike marked a sharp turn from the easing cycle overseen by Malhotra last year. Economists and financial traders now expect 2-3 more rate rises in coming months as price pressures show signs of broadening.

Analysts see a more hawkish policy outlook

Economists at Goldman Sachs Group Inc. said in a research note that their proprietary text-based measure of policy language found the minutes to be more hawkish than Governor Malhotra’s policy statement.

Members remained “more cautious on inflation, highlighting risks that supply-side shocks could broaden into more persistent price pressures through second-round effects,” they said.

Consumer-price growth accelerated to an almost two-year high in September, nearing the top of the RBI’s 2%-6% tolerance band. The central bank’s own forecasts show inflation will stay near current levels in coming months.

Such an outcome may leave India’s inflation-adjusted policy rate negative even after the RBI’s recent tightening, according to Madhavi Arora, an economist at Emkay Global Financial Services. She expects quarter-point increases in December and February.

“With inflation set to rise in coming quarters, the key determinant of the rate hike cycle’s duration will be whether price pressures become more broad-based,” Arora said.

External members oppose tightening stance

Still, two external members of the RBI’s monetary policy committee — Nagesh Kumar and Ram Singh — opposed the shift to a tightening stance, the minutes showed. They argued that heightened geopolitical and trade uncertainties warranted retaining a neutral setting.

Singh also warned that expectations of “significant rate increases” could undermine consumption and private investment and weigh on corporate capital spending plans, according to the minutes.

Rupee pressures add to RBI’s challenges

A weak currency is making the RBI’s job harder by making imports more expensive.

Pressure on the rupee — among the worst performers in Asia this year — has somewhat eased in recent days, however, after the RBI mounted its most aggressive defense in more than a decade.

The rupee extended gains for an eighth straight session on Wednesday to close at 94.4460, its highest since June 25.

“The RBI minutes indicate support for further rate increases with inflation showing initial signs of generalization,” said Gaura Sengupta, an economist at IDFC First Bank. “We expect RBI to hike policy rates in December and February.”

More stories like this are available on bloomberg.com

Published on October 22, 2026

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