RBI MPC Meeting at a Glance: Your one step guide for all decisions

The Monetary Policy Committee (MPC) unanimously voted to raise the policy repo rate by 25 basis points to 5.50% after a detailed assessment of evolving macroeconomic and financial conditions, developments and the outlook.

The Standing Deposit Facility (SDF) rate now stands at 5.25%, while the Marginal Standing Facility (MSF) rate and bank rate have been raised to 5.75%.

Also Read:RBI MPC Meeting 2026: Malhotra & Co hike repo rate by 25 bps to 5.50% for first time in nearly 4 years as inflation pressures build

Stance shifts to calibrated tightening

The MPC changed its policy stance to calibrated tightening, with the decision taken by a 4-2 majority.

RBI Governor Sanjay Malhotra said available data showed that inflation and its outlook were no longer as benign as they were last year.

He also indicated that rate cuts are off the table in the near term. Future policy action would either be a rate hike or a pause, depending on evolving economic conditions and the outlook.

Global risks remain elevated

Malhotra said the re-escalation of the West Asia conflict in September, along with volatility in global crude oil prices, had soured global economic sentiment and heightened financial market volatility.

He said escalating energy costs and rising food prices were expected to push up global inflation, prompting monetary policy tightening by major central banks.

Lingering trade uncertainty, rising bond yields in advanced economies and an appreciating dollar are also keeping global financial market sentiment fragile.

Malhotra said further tightening of global financial conditions, uncertainty over the fair valuation of AI stocks and the lack of a resolution to the West Asia conflict pose significant downside risks to the global economic outlook.

Indian economy remains resilient

Malhotra said the Indian economy remained strong, with economic momentum broad-based despite challenging global conditions.

Real GDP growth stood at 7.8% in Q1, supported by resilient consumption and strong investment activity, which rose nearly 12%. Net exports also continued to make a positive contribution.

High-frequency indicators for Q2 suggested that economic activity was maintaining momentum, although some moderation was visible compared with the previous quarter.

Manufacturing, services remain in expansion

Malhotra said manufacturing activity continued to hold up despite some pressures, as reflected in higher-frequency indicators and PMI readings.

Both manufacturing and services PMI remained in the expansion zone in Q2, although the pace of expansion slowed from Q1.

Private consumption also remained broadly resilient, supported by discretionary spending. Some weakness was, however, seen in non-durable goods and domestic air passenger traffic.

Growth outlook

Malhotra said real GDP growth for the year is projected at 7.1%, with growth estimated at 7.2% in Q2, 6.9% in Q3 and 6.8% in Q4, while growth in Q1 next year is projected at 7.1%. He said the 40 basis point upward revision to the growth forecast underscored the resilience of economic activity despite global headwinds, with risks to the growth outlook remaining evenly balanced.

Also Read:RBI GDP Growth 2026: Malhotra & Co raise FY27 GDP forecast to 7.1% from 6.7%

Looking ahead, Malhotra said global economic uncertainty will continue to have some bearing on domestic economic activity. While energy prices and supply chain pressures have continued, their near-term trajectory remains uncertain amid the lingering West Asia conflict. He said their adverse impact is being contained through active diversification of supply sources.

He said deficient southwest monsoon and strong El Niño conditions pose risks to the agriculture sector and rural demand, although healthy foodgrain buffers and proactive government policy interventions are expected to mitigate the impact. Continuing momentum in services and broadly stable employment conditions are likely to support urban demand.

Malhotra said strong capacity utilisation, robust credit flows and the government's thrust on infrastructure are expected to sustain investment activity. Services exports are expected to remain buoyant, while bilateral trade agreements should boost merchandise exports.

Inflation pressures broadening

Malhotra said food and fuel inflation picked up in August, partly due to unfavourable base effects.

Headline inflation rose to 4.2% in August, after remaining at 3.9% for three consecutive months.

Also Read: RBI Repo Rate 2026: Why RBI MPC lifted repo rates for the first time in nearly four years in October policy

He said broader price pressures were visible in diffusion indices, with the weighted share of items recording inflation above 4% rising to about 37% in August.

There were also early signs of inflation becoming more generalised, with core inflation rising and higher inflation being recorded across a larger share of the CPI basket.

Inflation outlook

Malhotra said CPI inflation for the year is projected at 5.2%, with inflation estimated at 4.9% in Q2, 6% in Q3 and 5.7% in Q4, while Q1 next year is projected at 5.6%. He said the risks to the inflation outlook are evenly balanced, while core inflation for the year is projected at 4.4%.

Malhotra said while there was some evidence of elevated inflation expectations and a broadening of inflation, there were limited signs of supply-side pressures becoming embedded in pricing behaviour.

Exchange rate, financial market measures

Malhotra said the RBI remains committed to ensuring orderly adjustments in the exchange rate in line with the country’s underlying macroeconomic fundamentals, while curbing excessive volatility.

Also Read:RBI opens up Account Aggregator network, making financial data sharing easier for consumers

He said the RBI is allowing interoperability among NBFC account aggregators. It is also facilitating SEBI-regulated depositories to include deposit account information in their consolidated account statements, allowing people to receive a single statement covering securities, equity, debt and bank deposit accounts. These measures will be implemented by the end of this year.

Malhotra also said the RBI will constitute a technical consultative committee for financial markets in response to rapidly evolving financial market developments. The committee will provide a forum for structured engagement with market participants and other stakeholders on policy and operational matters related to financial markets.