The Reserve Bank of India’s Monetary Policy Committee minutes showed that the central bank kept the possibility of further rate hikes open, as members flagged rising inflation, broader price pressures and the risk of second-round effects.

The Reserve Bank of India has left the door open to further rate hikes, with members of the Monetary Policy Committee flagging rising inflation, broadening price pressures and the possibility of second-round effects from supply shocks as risks that could warrant additional policy action. Per the RBI MPC minutes released on Wednesday, the duration and extent of the rate-hike cycle would be contingent on the actual growth-inflation developments and outlook, particularly underlying inflation, the broadening of price pressures, second-round effects of supply shocks and the impact of demand impulses.

Deputy Governor Poonam Gupta said a further increase in the policy rate could be required if higher input costs begin to pass through more significantly to output prices. “At some point, a larger pass-through of input costs to output prices may materialise,” Gupta said, adding that under such circumstances, “a further increase in the policy rate might be needed” to keep inflation and inflation expectations anchored. Gupta argued that the RBI should not wait for more definitive evidence of inflation becoming broad-based, given that monetary policy works with a lag. She said inflation was currently driven largely by external supply shocks, but the possibility of headline inflation reaching the upper tolerance limit warranted pre-emptive action.

6 per cent in Q1 FY28. 2 per cent from 5 per cent earlier.

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