RBI's October 2026 MPC Minutes: Why All Six Members Voted to Raise the Repo Rate
The Reserve Bank of India (RBI) published the minutes (the official record of each member's vote and reasons) of the 63rd Monetary Policy Committee (MPC) meeting, held from October 5 to 7, 2026.
All six members voted to raise the policy repo rate by 25 basis points (0.25 percentage points), from 5.25% to 5.50%. This is the first repo rate hike since February 2023. The Standing Deposit Facility (SDF) rate is now 5.25%, and the Marginal Standing Facility (MSF) rate and Bank Rate are 5.75%.
The MPC changed its stance (its signal about future moves) from "neutral" to "calibrated tightening". This means a rate cut is off the table for now; the next move can be a hike or a pause. The stance change passed 4–2: two external members, Dr. Nagesh Kumar and Prof. Ram Singh, wanted to keep the neutral stance.
The RBI raised its inflation (price rise) projection for 2026-27 to 5.2% (from 5.0%). It expects inflation to touch about 6.0% in the October–December quarter, which is the upper limit of its comfort band. Headline inflation averaged over the next three quarters is projected at about 5.8%.
Growth is strong: the GDP growth projection for 2026-27 was raised to 7.1% (from 6.7%), after 7.8% growth in April–June.
Members pointed to signs that price rise is spreading. About 37% of the items in the CPI basket now have inflation above 4% (about 20% in March). Trimmed-mean measures of underlying inflation rose to 3.7–4.2% in August from 2.2–2.7% in March. In the RBI's September survey, households' median expectation of inflation three months ahead was 9.9%.
Monetary Policy Committee (MPC): How RBI Sets the Repo Rate
The Monetary Policy Committee is a six-member body that decides India's main interest rate, the repo rate. The repo rate is the rate at which the RBI lends short-term money to banks against government bonds. When the MPC raises it, loans across the country slowly become costlier, which cools spending and price rise. The MPC was given legal backing in 2016 by changing the RBI Act, 1934.
The minutes show how the MPC's design works in practice. All six members, including the three external experts, backed a 25 basis point hike, but they split 4–2 on how strong a signal to send about the future. The next meeting is scheduled for December 2 to 4, 2026.
Flexible Inflation Targeting (FIT) Framework
Flexible Inflation Targeting is the system under which the RBI's main job is to keep retail inflation, measured by the Consumer Price Index (CPI), close to 4%. A band of 2% to 6% is allowed, because some ups and downs in prices are normal. It is called "flexible" because the RBI also keeps economic growth in mind while chasing the target. The target is set by the central government, in consultation with the RBI, every five years.
The hike is a pre-emptive move under this framework. With projected inflation heading towards the 6% ceiling and growth strong at 7.1%, the MPC judged that the "flexible" room to support growth was smaller than the risk of missing the target.
Inflation Expectations Anchoring and the RBI's Household Survey
Inflation expectations are simply what people think prices will do in the future. If a family believes that milk, rent and school fees will be much costlier next year, it will behave differently today. Workers ask for bigger pay rises, shopkeepers raise prices in advance, and people buy early before prices go up. Because of this, what people expect about inflation can itself push actual inflation up. When people's expectations stay steady near the central bank's target, even when prices jump for a short time, we say expectations are anchored. The RBI measures households' expectations through a regular survey called the Inflation Expectations Survey of Households (IESH).
Rising expectations were one of the main reasons the MPC acted in October 2026. Households' three-month-ahead median expectation reached 9.9% in the September survey, and urban three-month and one-year expectations rose by 70 and 60 basis points. Several members said they hiked early precisely to stop these expectations from de-anchoring.
- MPC meeting: 63rd meeting, October 5–7, 2026; minutes released October 21, 2026; next meeting December 2–4, 2026
- Repo rate: raised 25 bps, from 5.25% to 5.50% (vote 6–0); first hike since February 2023
- SDF: 5.25%; MSF and Bank Rate: 5.75%
- Stance: changed from neutral to "calibrated tightening" (Dr. Nagesh Kumar and Prof. Ram Singh preferred neutral)
- GDP growth projection 2026-27: 7.1% (up from 6.7%); Q1 actual 7.8%; Q2 7.2%, Q3 6.9%, Q4 6.8%; Q1 2027-28 7.1%
- CPI inflation projection 2026-27: 5.2% (up from 5.0%); Q2 4.9%, Q3 6.0%, Q4 5.7%; Q1 2027-28 5.6%
- CPI inflation August 2026: 4.8% (July: 4.5%); core inflation 4.2%; core excluding precious metals 2.9%
- Share of CPI items with inflation above 4%: about 37% (about 20% in March 2026)
- Trimmed-mean inflation: 3.7–4.2% in August 2026 (2.2–2.7% in March); weighted median 3.5%
- Households' 3-month-ahead median inflation expectation (September 2026): 9.9%
- Gross fixed capital formation: 34.3% of GDP in Q1 2026-27 (31.4% a year earlier); manufacturing growth 9.2%
- MPC members: Governor Sanjay Malhotra (chair), Dr. Poonam Gupta (Deputy Governor), Shri Indranil Bhattacharyya (Executive Director), Dr. Nagesh Kumar, Shri Saugata Bhattacharya, Prof. Ram Singh (external)