RBI Governor Malhotra Says It’s ‘Premature’ To Discuss Rate Hikes, Signals Wait-And-Watch Approach

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Tuesday dismissed speculation of an imminent interest rate hike, saying it is too early to discuss monetary tightening as uncertainties around inflation and growth continue to persist.

Speaking to ET Now and ET Now Swadesh, Malhotra said the Monetary Policy Committee (MPC) chose to maintain a neutral policy stance in its June meeting because the economic outlook remains uncertain.

He stressed that the central bank would continue to rely on incoming data while assessing risks to both inflation and economic growth. According to him, if the RBI was convinced that a rate increase was necessary in the near future, it would have shifted its stance from neutral to restrictive.

Earlier this month,

the six-member MPC left the repo rate unchanged at 5.25%, citing geopolitical tensions, supply-chain disruptions and weather-related risks. The committee also revised its FY27 growth forecast down to 6.6% from 6.9%, while raising its inflation outlook.

Market Forces Decide Rupee

Addressing the rupee, Malhotra reiterated that the RBI does not target any specific exchange rate. He said the value of the currency should be determined by market forces, with the central bank intervening only to curb excessive volatility.

Global Uncertainty As Biggest Challenge For Economy

Looking ahead, the governor described global uncertainty as the biggest challenge facing the economy over the next 12 to 18 months. Despite external risks, he expressed confidence in India’s ability to navigate potential shocks, pointing to strong macroeconomic fundamentals and a well-capitalised financial sector.

RBI Monitoring Inflation

On inflation, the governor said the central bank is monitoring whether higher fuel costs spill over into broader categories of goods and services. At present, the RBI has not observed significant second-round effects. He added that monetary policy intervention would become necessary only if price pressures spread beyond energy-related items.

Malhotra noted that headline inflation remains below the RBI’s 4% target, while core inflation is around 2.4%. Nevertheless, he identified monsoon conditions and energy prices as key factors that could influence the inflation trajectory in the coming months.

India’s retail inflation accelerated to 3.93% in May from 3.48% in April.