RBI Monetary Policy Review - October 2026

RBI Monetary Policy Review - October 2026

The MPC in a unanimous vote decided to hike the policy rate by 25 basis points, taking the Repo Rate to 5.50% and changing the policy stance to ‘calibrated tightening’.

• The RBI has pivoted to a more hawkish but measured policy approach. On policy stance, while two MPC members dissented & preferred neutral stance, the change basically signals that rate cuts are off the table and that future action will be limited to further hikes or a pause. We expect 50 bps of additional tightening in our base case and overall, we expect it to be a shallow tightening cycle with the Repo Rate potentially reaching 6.00%. Any incremental tightening beyond 6.00% would likely require a renewed deterioration in inflation, particularly from oil, El Niño or second-round effects, or a materially higher global-rate environment. While the MPC hiked policy rates, the RBI has retained a wait-and-watch approach on liquidity. We still believe that the RBI MPC is likely to continue draining surplus liquidity through VRRRs, OMO sales and potentially FX sell/buy swaps.