The Reserve Bank of India remains cautious on adjusting interest rates, citing volatile global energy markets, uncertainty around the monsoon, and inflation pressures driven by food and fuel costs as key factors influencing its stance.
Reserve Bank of India Governor Sanjay Malhotra said on Wednesday that the central bank is in no rush to change interest rates, even as inflation is expected to pick up. He said the latest rise in prices is being driven mainly by food and fuel costs rather than broad-based demand pressures, and that policymakers want more clarity on the inflation path before taking action.
Malhotra said the outlook has become cloudier because of uncertainty around the southwest monsoon, El Niño, geopolitics and global trade policy. He added that the Monetary Policy Committee wants to see whether temporary supply shocks filter through into underlying inflation, particularly after a period in which core inflation remained relatively subdued. The RBI kept its repo rate unchanged at 5.25% and maintained a cautious stance.
According to the governor, recent pressure from the West Asia conflict had eased in June as some government emergency measures were withdrawn and key supplies normalised, but the situation worsened again in early July, pushing up energy price volatility and renewing concern about supply chains. The Indian Express reported that Malhotra said global oil markets have remained highly unstable, with sharp swings driven by geopolitical developments.
The RBI lowered its real GDP growth projection for 2026-27 to 6.7%, while saying the economy remains resilient. Malhotra said headline inflation for 2026-27 is projected at 5.0%, with quarterly readings of 4.7% in the second quarter, 5.9% in the third and 5.5% in the fourth. Core inflation is seen at 4.3% for the year, with core inflation excluding precious metals expected to be lower before converging later in the year.
Malhotra also warned that weaker global trade growth, higher energy prices and persistent trade policy uncertainty could widen India’s current account deficit in 2026-27. He said the rupee would continue to be shaped by market forces, with the RBI stepping in only to curb excessive volatility, speculative behaviour and disorderly moves. The Financial Express said he also reiterated the central bank’s commitment to the 4% inflation target and its data-dependent approach.
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