RBI Governor Sanjay Malhotra: Discussing Rate Hikes Is Premature
MUMBAI: Reserve Bank of India (RBI) Governor Sanjay Malhotra stated on Monday that it is “premature” to discuss an interest rate hike, countering market expectations for tighter monetary policy. He emphasized that the central bank has not indicated any shift in its stance and remains focused on data amid ongoing global uncertainties.
In an interview with ET Now, Malhotra clarified that the current neutral stance of the RBI should not be seen as a precursor to higher rates. He remarked, “If we intended to signal a hike, we would have shifted the stance from neutral to restrictive.” He noted that while easing tensions in West Asia have positively impacted the global economy through lower crude oil prices, the situation remains fragile. Malhotra pointed out that supply restoration will take time, and the RBI is adopting a “wait-and-watch mode” as uncertainties continue.
Inflation and Economic Indicators
Malhotra addressed inflation, stating that there are no clear signs of second-round effects emerging. He mentioned that headline inflation is currently below the RBI’s 4% target, primarily due to food prices, while core inflation remains subdued at around 2.4%. Although wholesale price inflation has increased due to fuel costs, the central bank is monitoring whether these pressures will spread more broadly. “If price increases generalise and persist, then policy action would be warranted. At present, we do not see such generalisation,” he said.
Currency and Digital Initiatives
On the topic of currency, Malhotra reiterated that the rupee is determined by market forces, with RBI interventions aimed at curbing excessive volatility. He noted that recent measures have helped maintain orderly market movements and reduced speculative pressures. Regarding capital flows, he highlighted positive initial responses to initiatives like FCNR deposits and external commercial borrowings (ECBs), indicating resilience in the external sector.
Malhotra also discussed the RBI’s efforts to enhance digital financial infrastructure. The central bank is working to make the BHIM app interoperable with digital rupee wallets, which aims to improve user convenience and promote the adoption of the central bank digital currency (CBDC). Additionally, he mentioned that the RBI is exploring the use of artificial intelligence to bolster regulatory oversight and financial stability, including the implementation of ChiRAG, a tool designed to assist RBI staff in retrieving and analyzing internal data.
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