RBI Governor says rate cuts are off the table, future moves hinge on inflation

During the release of the Monetary Policy Committee minutes, RBI Governor Sanjay Malhotra stated that the central bank will not contemplate cutting rates in the immediate future, shifting instead to a policy of calibrated tightening. The committee had earlier this month unanimously raised the policy repo rate by 25 basis points to 5.50% and signaled a tighter stance amid rising inflation. Malhotra pointed to an expanding diffusion of price pressures, with 37% of CPI basket commodities experiencing inflation above 4% in August, up from 20% in March, and a rise in core inflation to 4.2% in August.

He cautioned that underlying inflation, excluding precious metals, is expected to exceed the RBI’s target soon, meaning future decisions will be limited to either another hike or a pause. Projections show headline CPI reaching 6.0% in the third quarter of FY2026-27 before easing to 5.7% later, while GDP growth is forecast at 7.1% for the year. Divergence among MPC members was noted, with Nagesh Kumar and Ram Singh preferring a neutral stance. Policymakers will reconvene on December 2-4 to reassess the outlook.