New Delhi, October 7 (Daily Kiran) : The Reserve Bank of India’s Governor, Sanjay Malhotra, stated on Wednesday that there is no possibility of interest rate cuts in the near future given the current economic conditions. The central bank has opted for a “calibrated tightening” approach in its monetary policy.
Following a three-day Monetary Policy Committee (MPC) meeting, Malhotra indicated that future policy actions may involve either an increase in the repo rate or maintaining the status quo. Rate cuts are not currently on the table.
Malhotra explained that the duration and extent of any rate hikes will depend on upcoming data regarding growth and inflation, underlying inflation trends, price pressures, and the impact of supply shocks.
The RBI anticipates that the average Consumer Price Index (CPI) inflation will hover around 5.8% over the next three quarters. Additionally, core inflation for the current fiscal year is projected to be approximately 4.94%.
As part of the monetary policy adjustments, the Standing Deposit Facility (SDF) rate has been set at 5.25%, while the Marginal Standing Facility (MSF) rate and the bank rate have been adjusted to 5.75%.
Despite global challenges, Malhotra asserted that the Indian economy remains resilient. He noted that private consumption is strong, supported by discretionary spending, and that sustainable investment appears robust based on various economic indicators.
However, he acknowledged signs of weakness in certain areas, such as non-durable consumer goods and domestic air passenger traffic.
According to the RBI, activity in the services sector remains strong, bolstered by both domestic and global demand. The manufacturing PMI and services PMI both indicate continued economic activity in expansion territory during the second quarter.
The MPC unanimously decided to raise the repo rate by 25 basis points, bringing it to 5.50% after reviewing the broader economic and financial conditions.
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