MPC minutes: Why RBI opted for status quo on rates

3 min readJun 19, 2026 06:54 PM IST

The panel had voted unanimously to keep the policy repo rate at 5.25% while retaining its monetary policy stance at ‘neutral’.

The Reserve Bank of India’s (RBI’s) rate setting panel, Monetary Policy Committee (MPC), preferred to adopt a “wait and watch” approach and remain watchful and wary about the generalisation of inflation in the coming months against the backdrop of the West Asia conflict and its impact, according to minutes of the MPC meeting held on June 5.

“We would continue to be data dependent and remain vigilant about inflation getting generalised, which can unhinge inflation expectations,” RBI Governor Sanjay Malhotra said in the MPC meeting. The panel had voted unanimously to keep the policy repo rate at 5.25% while retaining its monetary policy stance at ‘neutral’.

Malhotra said the RBI needs to be watchful of the inflation trajectory.

“Going forward, revision in retail prices of petrol and diesel in May would lead to higher fuel inflation in the coming months,” he said, as per the minutes.

While the near-term outlook for food prices remains favourable on account of a good rabi crop and adequate stocks, risks have amplified, especially from a below normal monsoon as predicted by the IMD and likely El Niño conditions.

Defending the economy, Malhotra said, “Our economic situation is quite strong and healthy vis-à-vis many of our peers. We are in a much better position today not only in terms of the current shock but also with respect to all earlier shocks. We are one of the fastest growing major economies and our inflation has been benign in the past year.”

“While demand-pull inflation may call for pre-emptive action to effectively anchor inflation expectations, cost-push inflation induced by supply shocks warrants greater caution — gradualism — in policy making. In view of these factors, I feel it is prudent to wait for greater clarity to emerge from the data before deciding on any policy action,” MPC Member Indranil Bhattacharyya said.

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According to MPC Member Ram Singh, if the inflation-related risks resolve favourably — food inflation remaining stable, global oil prices stabilising below $80 per barrel, and the Federal Reserve avoiding hawkish decisions— the MPC will have the room to continue to be growth-supportive.

“Despite my concerns, I must cautiously note that, as of early June ’26, I do not see material signals of economic overheating. Hence, the policy repo rate is currently appropriate and a status quo at the June 2026 review is likely to have the lowest economic cost,” said external MPC member Saugata Bhattacharya.

The RBI policy panel re-assessed both its growth and inflation projections, with risks emanating from elevated oil prices, uncertainty in global trade, adverse weather conditions and geopolitical tensions clouding the economic outlook. It lowered the growth projection from 6.9% to 6.6% and hiked the inflation forecast from 4.6% to 5.1%.