Reserve Bank of India (RBI) Governor Shaktikanta Das has cautioned that an interest rate cut at this stage would be “premature and very risky,” as inflation continues to remain a key challenge. Speaking at the India Credit Forum hosted by Bloomberg, Das emphasized that with inflation expected to stay above 5%, cutting the repo rate could jeopardize economic stability.
Earlier this month, the RBI’s Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 6.5% for the 20th consecutive month, despite calls for rate cuts. The MPC, however, shifted its stance from “withdrawal of accommodation” to “neutral,” signaling a more balanced approach moving forward.
Retail inflation, which surged to 5.49% in September from 3.65% in August, is expected to remain high through October before easing in November, Das noted. Despite concerns, he affirmed that India’s growth prospects remain strong, with the country projected to grow at 7.2%, based on the RBI’s latest estimates.
Das rejected the notion that the RBI is “behind the curve” in its monetary policy approach, highlighting the resilience of both growth and inflation management. He also dismissed suggestions that the RBI should follow calls for a rate cut in December, stating that the central bank would only consider such a move when inflation is consistently aligned with its 4% target.
“We would rather wait and watch,” Das said, adding that the RBI would only act when confident that inflation is durably under control. While some economists predict a rate cut in the coming months, Das made it clear that the RBI’s decisions will be guided by incoming data and inflation forecasts.