RBI Governor keeps rate outlook open, awaits clarity on inflation trajectory: RBI Minutes

Reserve Bank of India (RBI) Governor Sanjay Malhotra has signaled a cautious approach to monetary policy, keeping the outlook for policy rates open as the central bank seeks greater clarity on the inflation trajectory. According to the minutes of the Monetary Policy Committee (MPC) meeting, Malhotra voted to maintain the current policy rate and a neutral stance, noting that while inflation is showing signs of normalization, more evidence is needed before any recalibration. "I would prefer to wait for more certainty to emerge on the inflation trajectory... for any recalibration of the policy rate," Malhotra stated in the minutes. This stance comes as the Indian economy demonstrates robust resilience, with growth projected at 6.7% for the financial year 2026-27, outperforming expectations despite headwinds such as the conflict in West Asia, supply chain disruptions, and an erratic monsoon. However, Governor Malhotra also flagged rising inflation pressures, primarily driven by supply-side factors like higher food and fuel prices. He observed limited signs of inflation becoming broad-based, with core inflation remaining modest. "This shock does not therefore call for a monetary response to curtail demand as of now," he added. The RBI is closely monitoring risks from input costs, which could potentially become more widespread and impact inflation.

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I would prefer to wait for more certainty to emerge on the inflation trajectory in terms of the persistence of realised prints at these or higher levels, the forecast and the likely levels to which inflation may normalise and settle, for any recalibration of the policy rate.