MUMBAI: In recent statements, RBI Governor Shaktikanta Das made it clear that the Reserve Bank of India (RBI) is unlikely to lower interest rates in the immediate future due to persistent inflationary pressures. This reflects the RBI’s cautious approach to avoid risking economic stability with premature rate cuts despite recent rate cuts in other countries.
Over the last two years, the RBI has kept the repo rate, the rate at which banks borrow from the RBI, steady at 6.5%. Governor Das emphasized that while economic growth remains steady, inflation has seen fluctuations, reaching a nine-month high of 5.5% in September. This spike was largely driven by rising food prices, a trend expected to continue in the October report, making the current economic landscape unsupportive of a rate cut.
Das also noted that while India’s growth prospects remain resilient, with projections of around 7.2% for the fiscal year, inflation continues to be a critical concern. The Governor underscored that reducing interest rates could trigger an inflationary surge, potentially destabilizing the recent progress toward the RBI’s inflation target of 4% with a 2% margin. He likened inflation control to “keeping a horse in the stable,” warning that hastily loosening monetary policy could lead to inflation “bolting out of control” again.
Despite pressures from global central banks, including the U.S. Federal Reserve, which recently reduced interest rates, the RBI remains committed to maintaining its cautious stance. RBI Governor Shaktikanta Das assured that the RBI would only consider rate cuts once inflation aligns durably within the target range, indicating a patient “wait-and-watch” approach that aligns with the central bank’s long-term goals for sustainable economic health.
This conservative stance is further reinforced by the global rise in crude oil prices, adding to inflationary pressures through higher import costs. The RBI projects inflation to stabilize around 4.5% in FY25, signaling that while inflationary risks are being monitored closely, the RBI will only consider monetary easing once there’s consistent evidence of disinflation.
