New Delhi: Sanjay Malhotra, the newly appointed Governor of the Reserve Bank of India, has stated that the central bank will adopt a 'wait and watch' approach regarding any potential interest rate cuts. He highlighted the importance of balancing both economic growth and price stability.
With inflation rates declining, the RBI's Monetary Policy Committee (MPC) has been progressively lowering the benchmark repo rate, maintaining a neutral stance that allows for future adjustments in either direction. Since February, the central bank has reduced the repo rate by a total of 100 basis points.
In a recent interview with CNBC-TV18, Malhotra mentioned that the RBI is currently assessing the inflation outlook, and he is uncertain whether it will stabilize at 3 percent, as these evaluations are still ongoing.
"We will release our updated projections soon, and the MPC will consider the evolving economic situation before determining the necessary policy rate," he stated.
He added, "If inflation forecasts are lower, or if growth figures are disappointing, we may consider reducing policy rates, but we need to monitor the situation closely."
Malhotra emphasized that neither inflation nor growth should be prioritized over the other, stating, "Our primary focus is on price stability, which is our core mandate, while also considering growth. Both aspects are equally significant."
The MPC is set to convene early next month to discuss these matters.
Acknowledging that the transmission of rate cuts is still in its early stages, Malhotra noted that as of May, the transmission was only 24 basis points, despite a 50 basis point cut in June. He remarked, "There is still a considerable journey ahead, and while improvements have been noted, we have more ground to cover."
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