Monetary Policy Statement, 2026-27
63rd Meeting of the Monetary Policy Committee · 5–7 October 2026
Chaired by Shri Sanjay Malhotra, Governor, Reserve Bank of India
Rate Hike — Repo Rate at 5.50%
Stance: calibrated tightening · unanimous vote
Key Highlights
- ▸Repo rate hiked by 25 bps to 5.50% — unanimous MPC vote; first hike of the cycle
- ▸SDF rate adjusted to 5.25%; MSF rate and Bank Rate to 5.75%
- ▸Stance changed from neutral to calibrated tightening — rate cuts off the table; next move a hike or a pause (Dr. Nagesh Kumar and Prof. Ram Singh preferred retaining neutral)
- ▸CPI rose to 4.8% in August from 4.5% in July; core inflation up to 4.2% (2.9% excl. precious metals)
- ▸CPI projection for 2026-27 raised to 5.2% (from 5.0%), with Q3 peaking at 6.0%; core inflation seen at 4.4%
- ▸Real GDP growth for 2026-27 raised to 7.1% (from 6.7%) after a stronger-than-expected 7.8% in Q1
Real GDP Growth — 2026-27
Annual projection: 7.1% · Risks evenly balanced
| Quarter | Projection |
|---|---|
| Q2:2026-27 | 7.2% |
| Q3:2026-27 | 6.9% |
| Q4:2026-27 | 6.8% |
| Q1:2027-28 | 7.1% |
CPI Inflation — 2026-27
Annual projection: 5.2% · Core: 4.4% · Risks evenly balanced
| Quarter | Projection |
|---|---|
| Q2:2026-27 | 4.9% |
| Q3:2026-27 | 6% |
| Q4:2026-27 | 5.7% |
| Q1:2027-28 | 5.6% |
Global Outlook
Since the August 2026 MPC meeting, the re-escalation of the conflict in West Asia and the resulting sharp volatility in crude oil prices have kept the global economy in a state of flux. Global growth has remained resilient, but faster inflation in key economies has prompted a shift towards hawkish monetary policy. The US Fed hiked by 25 bps in September, and its subsequent commentary along with rate tightening by major systemically important central banks has reinforced expectations of higher global policy rates. Tighter global financial conditions and fiscal sustainability concerns in major economies are keeping global bond yields at record highs. With a resolution of the West Asia conflict remaining elusive, significant downside risks remain — including further tightening of global financial conditions, elevated AI-related asset valuations and high public debt.
Domestic Outlook
The Indian economy has remained resilient despite persisting global headwinds. Real GDP grew 7.8% in Q1:2026-27 as per NSO estimates — higher than expected — supported by strong private consumption and fixed investment, a rebound in merchandise exports and sustained buoyancy in services exports. Manufacturing grew at a robust pace and services activity strengthened further on buoyant domestic and external demand. High frequency indicators for July–August point to sustained momentum in Q2, with merchandise exports registering double-digit growth. Looking ahead, energy prices and supply chain pressures persist amid the lingering West Asia conflict, though their impact is being contained by active diversification of supply sources. A deficient south-west monsoon and strong El Niño conditions pose risks to agriculture and rural demand, partly mitigated by healthy foodgrain buffers and proactive government interventions. Services momentum and broadly stable employment should support urban demand, while strong capacity utilisation, robust credit flows and the government's infrastructure thrust should sustain investment. Bilateral trade agreements are expected to boost merchandise exports.
Inflation Outlook
CPI inflation increased to 4.8% in August 2026 from 4.5% in July. The rise was mainly due to higher food and fuel inflation, but core inflation has also picked up, indicating some widening of price pressures. Food price increases have become more broad-based, with notable spikes in sugar and onion, while the uptick in fuel inflation largely reflected unfavourable base effects. Core inflation rose to 4.2% and, excluding precious metals, to 2.9% in August. The weighted share of CPI items with inflation above 4% rose steadily to about 37%. The near-term outlook points to continued supply-side pressures from the deficient monsoon, ongoing El Niño conditions and high energy and commodity prices, whose pass-through is still continuing. CPI inflation is projected at 5.2% for 2026-27 and 5.6% for Q1:2027-28.
Rationale for Policy Decision
The global context remains challenging on account of geopolitical developments, but the Indian economy has been strong and its momentum broad-based. Inflation and its outlook are not as benign as last year — headline CPI is expected to average almost 5.8% over the next three quarters and core inflation is projected at 4.4% this year — making a recalibration of the policy rate imperative. Monetary policy acts on supply-side inflation mainly by curbing second-round effects (inflation expectations and firm-level pricing). There is some evidence of elevated inflation expectations and generalisation of inflation, though only limited signs of supply pressures getting embedded in pricing behaviour; demand-side pressures are limited, but strong growth in monetary and credit aggregates poses risks. The MPC therefore unanimously raised the repo rate by 25 bps to 5.50% and changed the stance to calibrated tightening, signalling that rate cuts are off the table in the near term and that the next action can only be a hike or a pause. The duration and extent of the hiking cycle will depend on growth-inflation developments, especially underlying inflation, the broadening of price pressures, second-round effects of the supply shock and demand impulses. Two members — Dr. Nagesh Kumar and Prof. Ram Singh — favoured retaining the neutral stance.
MPC Composition
Minutes to be published on
21 October 2026
Next MPC meeting
2–4 December 2026
Signed by
Brij Raj, Chief General Manager
Press release
2026-2027/1264
Source: Reserve Bank of India · Press Release 2026-2027/1264. For regulatory purposes, refer to rbi.org.in.