RBI Governor Says Room for Rate Cut Exists
At the last MPC meeting in October, it was communicated clearly that there is room to cut policy rates," Malhotra said.
Mumbai: The Reserve Bank of India (RBI) governor Sanjay Malhotra on Monday said that the latest macroeconomic indicators are looking good and suggests that there is a scope for an interest-rate cut. He said that at the last Monetary Policy Committee (MPC) meeting in October, the communication had already signaled that the room for policy easing exists and since then the benign inflation prints have not diminished that expectation.
“At the last MPC meeting in October, it was communicated clearly that there is room to cut policy rates," Malhotra said.
"Since then, the macro-economic data we have received has not indicated that the room to lower rates has decreased. There is certainly room but whether the MPC takes a call on that in the coming meeting or not, depends on the committee," he added.
He also said that the central bank has two mandates to maintain price stability and maintain growth. “We don’t remain aggressive on growth, nor we remain defensive.”
His comments come a week ahead of the meeting of the six-member MPC that starts from December 3. The outcome of the meeting would be announced on December 5.
The MPC cut the repo rate by a total 100 basis points in the first half of 2025 to 5.5 per cent, but has maintained a pause in August and October meet. India's retail inflation fell to a record low of 0.25 per cent in October, driven by a sharp fall in food prices and GST cuts on consumer goods.
Indian bonds gained ground after the RBI Governor’s comments. The benchmark 10-year bond yield fell four basis points to 6.48 per cent. Bond prices and yields move in opposite direction.
Speaking about rupee, Malhotra said that the rupee’s recent weakness is a natural outcome of inflation gap with advanced economies. A 3–3.5 per cent annual drop is typical for the currency, he said, adding that the RBI’s focus is on containing excessive volatility rather than defending any specific level. On Monday the domestic unit managed to stabilize at 89.24 against the dollar after Friday’s record low close of 89.48 as the RBI intervened, aggressively selling dollars in both the spot and the Non-deliverable forward market.
