December Rate Hike a Live Option After Hawkish MPC Minutes - QuantEco

A rate hike in December has emerged as a possibility after the Reserve Bank of India’s latest monetary policy minutes showed a more hawkish tone than earlier statements, according to QuantEco Research.

QuantEco described the minutes of the August 3-5 policy meeting as a “hawkish hold”, saying the tone was markedly different from the dovish interpretation that followed the policy announcement. The MPC had unanimously kept the repo rate unchanged at 5.25% and retained its neutral stance earlier this month.

“The debate within the committee has now shifted from how much further accommodation is available to when normalisation ought to begin,” QuantEco said, noting that the MPC minutes contained a clear reference to the end of the monetary easing cycle.

The research house highlighted Deputy Governor Poonam Gupta’s view that there was no scope for further easing and that a rate hike could become necessary as inflation rises. Governor Sanjay Malhotra also flagged that a normalisation of core inflation towards 4.3% could require a recalibration of the policy rate, while policy tightening may be needed if upside risks materialise.

However, QuantEco pointed to a divergence in the tone of the members. External members Nagesh Kumar and Ram Singh continued to cite benign core and core-core inflation as evidence of limited demand-side pressures, while Saugata Bhattacharya warned of second-round inflation risks from high fuel prices and elevated household inflation expectations.

QuantEco expects the RBI to hold rates in October as the panel assesses the monsoon, geopolitical risks and the pass-through of inflation into core prices. But it retained its forecast for 25-50 basis points of rate hikes by the end of the current fiscal year, with December 2026 now a “live option” for the first hike.