RBI minutes show MPC highlighting benign inflation, domestic demand seen resilient

The Reserve Bank of India announced minutes of its latest Monetary Policy Committee (MPC) meeting of the, held during September 29, 30 and October 1, 2025. MPC member Dr. Nagesh Kumar noted that the inflationary expectations remain well-anchored, and the average headline inflation has trended down, with projections for 2025-26 have now been revised downwards to 2.6% from 3.7% in the June MPC meeting. The GST reforms are also likely to push it down further. Therefore, the benign inflation outlook opens up policy space for monetary action.

Saugata Bhattacharya stated that despite the continuing moderation in inflation opening up space for further monetary policy easing, the arguments for a pause in my August 2025 statement remain materially the same. Although domestic economic activity remains resilient, trade and tariff uncertainties remain a risk to growth and investment.

Ram Singh stated that since the last MPC meeting, the case for another rate cut in this cycle has become stronger. However, in view of the fiscal measures and the earlier monetary easing still working and the uncertainty on the external front looming large, I vote for a pause in the policy repo rate, he noted.

Indranil Bhattacharyya opined that looking ahead, growth in H2:2025-26 and beyond is likely to be determined by the interplay of domestic tailwinds and external headwinds. Domestic demand is expected to get a boost from growth supportive measures and policies such as GST rationalisation, income tax relief, past monetary policy actions and several regulatory measures announced by the Reserve Bank. Benign inflation outlook and lower GST rates are also supportive of a revival in urban consumption demand.

Poonam Gupta noted that the Indian economy is proving to be resilient overall, well on its way to attain a healthy growth rate in the ballpark of 6.5 to 7.0 per cent, both this year and the next. Lower and steadier inflation has been another welcome enabler.

RBI Governor Sanjay Malhotra stated that headline CPI inflation moderated to an eight-year low of 1.6 per cent in July before inching up to 2.1 per cent in August. The decline in inflation was primarily driven by the food component due to improved supply conditions and measures undertaken by the government to manage the supply chain. Core (CPI excluding food and fuel) inflation remained contained at 4.2 per cent in August despite pressures from higher prices of gold and silver. He further noted that in view of GST rationalisation and benign food prices, the projection of headline inflation for 2025-26 has now been lowered to 2.6 per cent from 3.1 per cent projected in the August policy and 3.7 per cent in June. The outlook for inflation in Q1:2026-27 is also benign and has been revised downwards.

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