Reserve Bank of India (RBI) Governor Sanjay Malhotra pushed back against market expectations of an imminent rate hike on Wednesday, saying it would be “premature” to discuss monetary tightening as inflation risks remain uncertain and the central bank continues to assess global developments.
“If it was so certain that we were going to hike rates in the coming months, we would have changed our stance from neutral to restrictive. We did not do that,” Malhotra said in an interview with ETNow.
Following his remarks, yields on India’s 10-year benchmark government bonds fell five basis points to 6.82%, their lowest level in three months. Overnight index swaps, a key indicator of rate expectations, eased 10 basis points as traders pared back bets on policy tightening.
Malhotra said the RBI remains cautious and data-dependent, monitoring whether recent price pressures, particularly from fuel costs, spill over into broader inflation. “We are looking at whether these pressures are temporary or whether they become generalised and get built into inflation expectations. We do not see signs of that happening yet,” he said.
He noted that headline inflation remains below the RBI’s 4% target at 3.9%, while core inflation stands at around 2.4%. Though wholesale price inflation has increased, much of the rise has been driven by fuel-related components, he added.
The governor said easing tensions in West Asia has reduced some upside risks to inflation and growth. Softer crude oil prices and a sharp decline in fertiliser prices have provided relief to the economy.
However, he cautioned that the situation remains fluid, with policymakers continuing to monitor developments such as the monsoon progress and the durability of the ceasefire. “We are in wait-and-watch mode,” he said, adding that global uncertainty remains the biggest concern for policymakers.
On the external sector, Malhotra said the RBI’s recent measures to attract foreign currency inflows, including relaxations for FCNR(B) deposits and external commercial borrowings (ECBs), have received an encouraging initial response. “We do not have any target in mind, but the response has been good and we expect healthy flows,” he said.
He highlighted strong remittances, robust services exports, improving foreign direct investment inflows and expected benefits from trade agreements as factors supporting India’s balance of payments.
On the rupee, Malhotra reiterated that the RBI does not target a specific exchange rate level and intervenes only to curb excessive volatility and maintain orderly market conditions.
Looking ahead, the governor said global uncertainty remains the biggest macroeconomic challenge for India. “We are well positioned from a macroeconomic, financial system and external sector perspective, but global uncertainty remains challenge number one,” he said.
TOPICSRBIReserve Bank of IndiaThis article was first uploaded on June twenty-four, twenty twenty-six, at thirty-one minutes past six in the evening. © The Indian Express (P) Ltd