MPC minutes: Members stay growth-supportive amid benign inflation outlook

The MPC unanimously decided to keep the policy repo rate unchanged during its February meeting

Most members of the Reserve Bank of India’s (RBI’s) six-member monetary policy committee (MPC) indicated their support for growth, as inflation outlook remained benign, showed minutes of the MPC’s February meeting, released on Friday. 

While the MPC unanimously decided to keep the policy repo rate unchanged at its February meeting, only one member, Ram Singh, preferred a change in stance to accommodative. 

“In terms of the overall trajectory, inflation, as projected earlier too, is expected to remain benign,” RBI Governor Sanjay Malhotra said in the minutes. 

“From the perspective of the monetary policy, it is germane to mention that, while we target headline inflation, the composition of inflation is also important, as monetary policy has varying impact on different constituents of inflation,” Malhotra said. Underlying inflation remained low, and the inflation outlook, excluding precious metals, was even lower, he added. Precious metals contribute 60-70 basis points to inflation. 

Commenting on the recent trade deals with the European Union and the United States, he said these deals would not only strengthen exports and the current account but also attract higher investment. 

 

Observing that low inflation continued to be a boon, Deputy Governor Poonam Gupta s highlighted that core inflation, excluding precious metals, remained at 2.3 per cent (December 2025) and was projected to remain benign in the next two quarters (the April-June and July-September quarters of 2026-27). 

“With capacity utilisation rates steady at 74 per cent, there does not seem to be a risk of buoyant economic activity resulting in higher inflation,” she said. 

External member Ram Singh, seen as most dovish by the market, also said there were no signs of overheating in the economy, despite a growth rate of over seven per cent. “Filtering out the effect of increases in precious metal prices (60-70 bps), the underlying inflation pressures are expected to remain muted,” Singh said, emphasising the economy was entering a structural phase where a 7 per cent-plus growth rate and moderate inflation could coexist. 

“In view of the reduced volatility underlying headline CPI (consumer price index) and the dormancy of the CPI core (excluding gold and silver), it cannot be the end of the current easing cycle,” Singh said. The exact amount and timing of the further rate cut will depend on incoming data, but a growth-supporting stance is very much consistent with a stable inflation outlook, he added. 

Another external member, Nagesh Kumar, also agreed on monetary policy support to lift growth. “With the continued benign inflationary outlook opening up some policy space, and with growth rates looking up, the monetary policy may turn its focus to support the acceleration of economic growth rates from around 7 per cent to around 8 per cent, complementing the fiscal policy,

in tune with the Viksit Bharat vision,” Kumar said. 

Another external member, Saugata Bhattacharya, however, said not just higher inflation but the risks of further inflationary pressures were accumulating. “Despite this, the good news is that household inflation expectations remained anchored,” he said, adding that the new data series would provide a clearer lens on the growth-inflation balance. 

Indranil Bhattacharyya also agreed that the new CPI series would provide greater clarity on inflation developments, as the weighting diagram of the new index reflects a more updated consumption basket. “With headline inflation remaining well below the target throughout 2025-26 and projected at around the target in the first half of 2026-27, the current policy rate and the stance offer scope to remain growth-supportive without stoking inflation,” he said, adding a neutral stance provides the flexibility to respond appropriately to the evolving situation.