New Delhi: Reserve Bank of India (RBI) Governor Sanjay Malhotra has indicated that interest rate cuts are off the table in the near term, with future monetary policy decisions limited to either raising rates further or keeping them unchanged, depending on inflation and economic growth conditions.
According to the minutes of the Monetary Policy Committee (MPC) meeting held from October 5 to 7, released by the RBI on Wednesday, Malhotra said the duration and extent of the current rate-hiking cycle would depend on how inflationary pressures evolve.
"Nevertheless, I feel it is appropriate to change the stance to calibrated tightening, essentially signalling that rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause, depending on the evolving circumstances and the outlook," Malhotra stated.
The remarks come after the MPC unanimously raised the policy repo rate by 25 basis points to 5.50 per cent earlier this month and shifted its monetary policy stance to calibrated tightening amid rising inflationary pressures.
The RBI Governor highlighted growing signs that inflation was spreading across a wider range of goods and services, raising concerns about the persistence of price pressures.
"In terms of the diffusion index, there are increasing signs of generalisation of inflation as 37 per cent of the commodities in the CPI basket had inflation above 4 per cent in August – it was merely 20 per cent in March," he said.
Malhotra also noted that core inflation increased from 3.9 per cent in July to 4.2 per cent in August, while core inflation excluding precious metals rose to 2.9 per cent.
He cautioned that underlying inflation, excluding precious metals, was expected to move above the RBI's inflation target in the coming months.
"The duration and extent of the rate hiking cycle would be contingent on the actual growth-inflation developments and outlook, especially that of underlying inflation, the broadening of price pressures, second-round effects of the supply shock, and the impact of demand impulses," Malhotra stated.
The MPC minutes showed that headline consumer price inflation is projected to reach 6.0 per cent in the third quarter of FY2026-27 before moderating to 5.7 per cent in the fourth quarter.
Despite the inflation concerns, the RBI maintained a positive assessment of economic activity, with India's real GDP growth projected at 7.1 per cent for FY2026-27, compared with the earlier estimate of 6.7 per cent.
The minutes also revealed differences among MPC members over the appropriate policy stance. While all six members supported the 25-basis-point rate hike, Nagesh Kumar and Ram Singh favoured retaining a neutral stance rather than shifting to calibrated tightening.
The RBI's next MPC meeting is scheduled for December 2 to 4, when policymakers will reassess inflation developments and economic growth before deciding whether another rate increase is warranted.