RBI Policy
Rates to stay low but more cuts to be data driven, says Malhotra
This story was originally published at 15:50 IST on 5 December 2025
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--RBI Malhotra: We are at neutral today
--RBI Malhotra: Inflation very benign
--RBI Malhotra: We are neutral on future interest rate trajectory
--RBI Malhotra: Expect CPI inflation very benign
--RBI Malhotra: Speculative to say if benign CPI will lead to more cuts
--RBI Malhotra: MPC mostly driven by growth-inflation dynamics
--RBI Gupta: See GDP growth slowing in qtrs ahead as base effects normalise
--RBI Malhotra: Further policy actions to be data driven
--RBI Malhotra: Expect policy rates to be low, not high, going ahead
--RBI Malhotra: Policy rates to be low, not high, if inflation falls more
--RBI Malhotra: CPI inflation at 0.2% not right for India
--RBI Malhotra: CPI inflation at 0.2% not right for India, we target 4%
--RBI Malhotra: Underlying inflation on lower, that's why we gave rate cut
--RBI Malhotra: Underlying inflation on lower side, that's why we cut rates
--RBI Malhotra: Real interest rates quite high today
--RBI Malhotra: 5% rupee fall leads to 35 bps rise in CPI
--RBI Malhotra: 5% rupee fall leads to 25 bps rise in growth
--RBI Gupta: IMF should be satisfied once India's GDP series revised
MUMBAI – Interest rates in India are expected to stay low going ahead with inflation seen staying benign, Reserve Bank of India Governor Sanjay Malhotra said Friday. Whether the Monetary Policy Committee can further lower interest rates will depend on how data pans out, Malhotra said.
"All I can say is that going forward, we expect benign inflation and so if inflation continues to be the way it is, we expect policy rates to be low and not high," Malhotra said at the post-policy press conference. "What rate it will be, that will be getting into speculation."
The RBI's MPC Friday lowered the repo rate by 25 basis points to 5.25%, bringing the total easing to 125 bps in 2025. Malhotra said the MPC decided to lower rates because of low inflation and with growth seen easing going ahead.
"Whether there is more space going forward, we are at neutral today," Malhotra said. "The more important thing now is that having reduced the policy repo rate by further 25 basis points, we have to now concentrate on the monetary policy transmission," Malhotra said.
With inflation expected to stay benign going ahead, the MPC will wait to see the transmission of policy easing into the real economy, Malhotra said, adding that the panel will "take it policy by policy" depending on how growth-inflation dynamics behave.
CPI inflation fell to a record low of 0.25% in October and the central bank has now lowered its forecast for 2025-26 (Apr-Mar) by 60 bps to 2.0%. Malhotra said CPI inflation at around 0.2% is not right for India and the RBI targets 4%. Since underlying inflation is on the lower side, the MPC decided to lower rates, the governor said. Malhotra said real interest rates, which are adjusted for inflation, are quite high right now.
Asked about the impact of the falling rupee on inflation, Malhotra said RBI research shows that a 5% fall in the rupee against the dollar leads to a 35-bps rise in inflation and GDP growth by around 25 bps.
The RBI raised its GDP growth forecast for FY26 by 50 bps to 7.3% after the economy expanded quicker-than-expected at 8.2% in the September quarter. Despite the upgrade to the full-year forecast, GDP growth is expected to slow down during Oct-Mar.
RBI Deputy Governor Poonam Gupta said that GDP growth is seen slowing in the coming quarters as the statistical effect of a favourable base normalises. Asked about the International Monetary Fund's 'C' grade assigned on India's national accounts data, Gupta said the IMF should be satisfied once India's GDP series is revised.
The IMF last month retained 'C' grade for India's national accounts data and said that "some methodological weaknesses somewhat hamper surveillance". The statistics ministry will release the revised GDP series with 2022-23 as the base year at the end of February. End
Reported by Shubham Rana
Edited by Akul Nishant Akhoury
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