Summary of this article
RBI may raise interest rates further if inflationary pressures spread.
Inflation forecast rises as input costs and core prices increase.
MPC will assess growth and inflation before its December meeting.
The Reserve Bank of India (RBI) has indicated that further interest rate hikes could be necessary if inflationary pressures intensify, according to the Monetary Policy Committee (MPC) minutes published on Wednesday, October 21, 2026. Members of the MPC have raised concerns about rising input costs, broader price increases and the possibility that supply disruptions could push inflation higher.
The MPC’s assessment has indicated that future rate decisions will depend on how inflation and economic growth evolve. Policymakers will also monitor whether businesses pass higher production costs on to consumers and whether strong demand adds to price pressures.
RBI Flags Risk Of Higher Input Costs Feeding Inflation
According to the minutes, the RBI Deputy Governor, Poonam Gupta, has stated the possibility that businesses could pass a larger share of their higher input costs on to consumers. If this happens, the RBI might need to raise the policy rate further to keep inflation and public expectations of future price increases under control.
Gupta has also emphasised the need for early action, given the time monetary policy takes to influence the economy. Although external supply shocks have driven much of the recent inflation, she cautioned that policymakers could not afford to wait until price pressures spread more widely before responding.
The RBI has projected retail inflation at 6 per cent in the third quarter of FY27, followed by 5.7 per cent in the fourth quarter. Inflation is expected to ease to 5.6 per cent in the first quarter of FY28. The full-year inflation forecast has been raised to 5.2 per cent from the earlier estimate of 5 per cent.
Core Inflation And Price Pressures Draw Attention
Governor Sanjay Malhotra has stated that data indicate that inflation was spreading across more items in the consumer price index (CPI) basket. The proportion of commodities recording inflation above 4 per cent rose to 37 per cent in August from 20 per cent in March.
Core inflation, which excludes food and fuel, increased to 4.2 per cent in August from 3.9 per cent in July. When precious metals were excluded, core inflation stood at 2.9 per cent in August. Malhotra also expected this measure to move above the RBI’s inflation target in the coming months.
Executive Director Indranil Bhattacharyya has pointed to evidence of higher costs feeding into prices for restaurant meals and cooked food. Purchasing Managers’ Index surveys and producer-price indices also indicated that businesses could pass on more of their costs, particularly if demand stays strong.
MPC member Saugata Bhattacharya backed the case for tighter monetary policy, citing inflation risks and financial-market conditions. He also expressed concern that prevailing and projected real interest rates might not be high enough to secure price stability.
The next MPC meeting is scheduled for December 2 to 4. Policymakers will review fresh data on inflation and economic activity before deciding the next course of action.
