RBI MPC Members Flag High Inflation In Q3, Signal Rate Hike Later This Year
RBI MPC members warned that rising inflation could warrant a rate hike later this year, with inflation projected to peak at 5.9 per cent in Q3 of FY27.
Even as the members of the Monetary Policy Committee (MPC) held interest rates this month, they acknowledged that the case for tightening could emerge if price pressures broaden later this year, revealed the minutes of the meeting released on Wednesday. Members expect headline inflation to peak to a level as high as 5.9 per cent in Q3 2026-27.
The RBI MPC meeting minutes are an important source of communication regarding future course of monetary policy action. The six member rate setting panel had kept the policy repo rate unchanged at 5.25 per cent for the fourth consecutive meeting on August 5. It raised the economic growth forecast for FY27 to 6.7 per cent from 6.6 per cent and lowered its inflation projection to 5 per cent from 5.1 per cent.
Sanjay Malhotra, governor RBI said that there are signs of a normalisation of inflation from its benign levels seen hitherto. He said that the average inflation last year, when the policy rate was brought down to 5.25 per cent, was only two per cent but has averaged to 3.93 per cent this year. Core inflation is projected to average 4.3 per cent in 2026-27 which may suggest a recalibration of policy rate.
“However, I would prefer to wait for more certainty to emerge on the inflation trajectory in terms of the persistence of realised prints at these or higher levels, the forecast and the likely levels to which inflation may normalise and settle, for any recalibration of the policy rate.”
The governor also said that one needs to be watchful as the risks of higher food, fuel and other input prices translating into a broad-based increase in inflation and de-anchoring of expectations persist. “Any evidence of these risks materialising may need policy tightening,” warned Malhotra.
Poonam Gupta deputy governor RBI said given that the headline inflation is projected to peak to a level as high as 5.9 per cent in Q3 2026-27, a case for a hike may emerge during the course of the year.
Other members flagged several risks to the inflation and growth outlook, including inconsistent monsoon conditions, El Nino, trade policy and the ongoing West Asia conflict.
