RBI's panel left decision rate cut for opportune time despite room for reduction: MPC minutes

Mumbai, Oct 15 (PTI) Reserve Bank Governor Sanjay Malhotra and other members of the monetary policy committee (MPC) saw room for an interest rate cut earlier this month, but left the decision for an opportune time, the MPC meeting minutes released on Wednesday showed.

The next meeting of the rate-setting panel, MPC, is scheduled for December 3 to 5.

All six members of the MPC had unanimously decided to retain the short-term lending rate (repo) at 5.5 per cent because of global uncertainty, though domestic inflation was benign.

During the meeting, Malhotra said the benign outlook for headline and core inflation as a result of the downward revision of projections opens up policy space to further support growth.

"...even though there is a policy space to further cut the policy rate, I feel this is not the opportune time for the same, as it will not have the desirable impact.

"Therefore, I vote to keep the policy repo rate unchanged at 5.50 per cent. The intent of policy, nevertheless, is to continue to facilitate growth-enabling conditions," he said, according to the minutes of the MPC meeting, which concluded on October 1.

MPC member and RBI Deputy Governor Poonam Gupta opined that with the implementation of the rationalised GST rates since September 22, 2025, the inflation outlook appears to be more benign.

This, along with the lesser food price build-up has led the RBI to lower its current year inflation projection since the last policy by 50 bps to 2.6 per cent.

"The described growth-inflation mix, particularly slower growth in H2 and a benign inflation rate, has potentially opened some space for lowering the policy rates further; yet it is difficult for me to vote for a rate cut at this juncture," she said.

RBI Executive Director and panel member Indranil Bhattacharyya too said it can be inferred that the sharp moderation in inflation has undoubtedly opened up policy space for further rate easing.

However, he voted to pause at the present juncture based on several considerations.

Given the heightened uncertainty, a rate cut at this point may not have the intended impact, he said.

He also said that given no market expectation of a rate cut, any rate reduction would surprise the market, which is detrimental in terms of policy credibility over the medium term.

The three external members on the MPC -- Nagesh Kumar, Saugata Bhattacharya, Ram Singh -- also had similar views.

Nagesh Kumar said the Trump administration has delivered a comprehensive assault on India with successive announcements over the past few weeks.

"Before we could absorb the 25+25 per cent reciprocal and penal tariffs on goods that became effective from the end of August, a hefty USD 100,000 fee was imposed on H1B visas," he said, and added there are also other measures, including the proposed HIRE Act on outsourcing.

Kumar said the trade policy measures adopted by the US, India's biggest trade partner and biggest market for exports of goods and services, pose challenges for the economy.

"The benign inflation outlook opens up policy space for monetary action. However, we may wish to wait and watch as the transmission of the existing actions is still unfolding and to see how the trade policy uncertainties play out before considering a rate cut at the December Meeting of the MPC," he said.

Since February, the Reserve Bank has reduced the repo rate by 100 basis points in three tranches. In the last two MPC meetings, it maintained status quo on the interest rate.

According to the minutes, Saugata Bhattacharya said a moderation in the inflation rate is not a compelling reason, at this point, to cut the policy rate.

"It is also worth re-emphasising that monetary policy has to address multiple, often conflicting, objectives and optimise the consequent trade-offs," he said.

He also emphasised that monetary policy has to address multiple, often conflicting, objectives and optimise the consequent trade-offs.

External member Ram Singh said that since the last MPC meeting, the case for another rate cut in this cycle has become stronger.

However, in view of the fiscal measures and the earlier monetary easing still working and the uncertainty on the external front looming large, he voted for a pause in the policy repo rate. PTI NKD NKD BAL SHW