# Reserve Bank of India rules out near-term rate cuts while Asian central banks lean toward tightening

Minutes show Governor Sanjay Malhotra tying further increases to the growth and inflation outlook, and the Bank of Korea held at 3% after two consecutive hikes.

- Published: 2026-10-22T05:18:53.241Z
- Canonical: https://polylog.news/2026-10-22/reserve-bank-of-india-rules-out-near-term-rate-cuts-while-as
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [Mint (Economy)](https://www.livemint.com/economy/rbi-mpc-minutes-governor-sanjay-malhotra-ties-future-hikes-to-growth-inflation-outlook-here-is-what-he-said-11792587321532.html), [Economic Times](https://m.economictimes.com/markets/forex/why-rbi-is-draining-excess-liquidity-but-also-injecting-funds/articleshow/135103570.cms)

Minutes of the Reserve Bank of India's October Monetary Policy Committee (MPC) meeting show [members divided over how far to tighten](https://www.livemint.com/economy/rbi-mpc-minutes-governor-sanjay-malhotra-ties-future-hikes-to-growth-inflation-outlook-here-is-what-he-said-11792587321532.html). Governor Sanjay Malhotra tied any further increase to the balance between growth and inflation. The committee raised the repo rate by 25 basis points this month and [moved its stance to "calibrated tightening,"](https://www.etvbharat.com/en/business/rbi-mpc-meeting-october-2026-sanjay-malhotra-25-basis-points-repo-rate-hike-inflation-india-gdp-enn26100701116) ETV Bharat reported. [Business Today](https://www.businesstoday.in/latest/economy/story/rate-cuts-are-off-the-table-in-the-near-term-rbi-in-october-mpc-minutes-562950-2026-10-22) quotes the minutes as saying rate cuts are "off the table in the near term." According to [ThePrint's account of the minutes](https://theprint.in/economy/higher-inflation-price-pressure-spillover-led-to-rbi-hiking-rate-mpc-minutes/3078049/), 37% of the items in the consumer price index were rising faster than 4% in August, up from 20% in March. The next meeting is December 2 to 4.

The central bank is also managing money-market liquidity in both directions. The [Economic Times](https://m.economictimes.com/markets/forex/why-rbi-is-draining-excess-liquidity-but-also-injecting-funds/articleshow/135103570.cms) explains that banking-system liquidity surged after banks received inflows from overseas Indians under the foreign-currency deposit scheme for non-residents (FCNR(B)). The scheme was designed to support the rupee. The RBI then drained much of that surplus quickly through reverse repo auctions and changes to the cash reserve ratio, while injecting funds elsewhere. In practice, the central bank is undoing in the domestic money market the cash it brought in to defend the currency.

India is not alone. The Bank of Korea [held its policy rate at 3.00%](https://www.investing.com/news/economy-news/bank-of-korea-holds-rates-as-expected-after-backtoback-hikes-4964494) on Thursday after raising it in July and August, as all 34 analysts polled by Reuters expected. Strong chip exports and above-target inflation keep a November increase possible.

## What this means

Asian oil importers are tightening to defend their currencies against the oil shock, not because domestic demand is overheating. Imported fuel inflation is spreading through the consumer basket, and a weaker currency would make it worse. Rate-sensitive borrowers, Indian consumer-credit lenders and Korean households are exposed. Holders of short-dated local bonds gain from higher rates. India's FCNR(B) inflows show the cost of defending the rupee: the cash raised to support the currency has to be drained again, which adds to banks' funding costs. Consensus assumes these hikes stop once oil eases. The spread of price increases across the basket suggests inflation will persist. The 2013 deposit scheme is the precedent: it stabilized the rupee but left tight liquidity for several quarters. The likelier outcome is another 25 basis-point increase from at least one of these two central banks by December if Brent stays above $100. A sustained fall in crude would let both pause.

## What to watch

- India's September consumer price data. A further spread of price increases across the basket would make a December hike likely.
- The Bank of Korea's November decision. A third hike would confirm that Asian central banks are leaning against the oil shock rather than looking past it.
- The rupee against the dollar after the deposit inflows slow, which will show whether the defence lasts.