MPC adopts wait-and-watch approach amid risk of food, fuel inflation: RBI MPC minutes

### RBI MPC Meeting — Key Takeaways * **Repo rate unchanged at 5.25%:** RBI’s MPC unanimously voted to maintain the policy rate, preferring a **wait-and-watch approach**. * **Inflation risk remains:** Rising **food, fuel and other input costs**, partly linked to higher energy prices from the US-Iran conflict, could create broader inflationary pressure. * **No broad-based inflation yet:** RBI noted that there is **limited evidence of generalised price pressures**, with core inflation remaining below 4%. * **RBI Governor’s view:** Governor Malhotra said monetary tightening would be justified if the supply shock causes **persistent inflation, unanchored inflation expectations, or a broad-based rise in prices**. * **Growth remains resilient:** The Indian economy performed **better than expected in Q1 FY2026-27**, despite West Asia disruptions, supply-chain uncertainty and an erratic monsoon. * **Agriculture risk:** MPC member Nagesh Kumar cautioned that the agricultural outlook remains uncertain because of **El Niño**, although monsoon conditions improved in July. * **Potential growth above 7%:** MPC member Ram Singh observed that around **7% growth without demand-driven inflation** suggests India's potential growth rate at a neutral interest rate could be **above 7%**. ### Market Interpretation **Positive:** Strong growth + controlled core inflation + stable interest rates = supportive for equities and domestic demand. **Risk:** A sustained rise in crude oil, food prices or input costs could push headline inflation higher and eventually force the RBI to consider **rate hikes**. **Bottom line:** The RBI is currently **supportive but cautious**. The key variables to watch are **crude oil prices, food inflation, monsoon/El Niño developments, core inflation and inflation expectations**.