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Informist, Friday, Jun. 5, 2026

 

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--RBI Malhotra: We will be data dependent on rate going forward 
--RBI Malhotra: Case for rate hike now adverse than earlier 
--RBI Malhotra: Purpose of MPC meet is to discuss all possibilites on rates
--RBI Malhotra: Inflation 4% target is not in abeyance
--RBI Malhotra: CPI target sacrosanct for us
--RBI Malhotra:Not advisable to act on every small, large deviations in econ 
--RBI Malhotra: Cannot deviate from inflation target
--RBI Malhotra: Inflation target is a medium-term target
--RBI Malhotra: Effect of ongoing supply shocks to persist
--RBI Malhotra: We will be very watchful, inflation getting generalised
--RBI Malhotra: Neither possible nor desirable to have inflation always at 4%
--RBI Malhotra: Inflation target range exists for a reason
--RBI Malhotra: Monitor inflation expectation, pass through of prices
--RBI Malhotra: Monsoon, El-nino uncertainty can impact growth, inflation
--RBI Malhotra: Global crude oil prices averaged near $100/bbl in last 2 mos
--RBI Malhotra: Crude prices FY27 may be substantially higher than Apr view
--RBI Malhotra: India at better place vs other nations despite crude shocks
--RBI Malhotra: Assume crude oil will be $95 a barrel in FY27
--RBI Malhotra: Closely watching crude oil supply restoration, monsoon

 

NEW DELHI – The Reserve Bank of India does not take action for every small or large deviation from its medium-term inflation target of 4%, Governor Sanjay Malhotra said Friday. Even as the central bank sees inflation rising to over 5% in the current financial year, the 4% target is not in abeyance, Malhotra told reporters. 

 

"The target is to be met over a period. It's a medium-term kind of a target," Malhotra said. "And it is not advisable to take action for each and every small, or large, especially small, deviations from the target because that can have consequences which can be disproportionate for growth," the RBI governor said after announcing the Monetary Policy Committee's decision to leave the policy repo rate unchanged at 5.25%.

 

The RBI Friday raised its headline inflation forecast for 2026-27 (Apr-Mar) by 50 basis points to 5.1%, considering the mounting pressure due to the ongoing West Asia war. Besides the pressure on inflation from higher energy prices and supply side bottlenecks, sub-normal rainfall and El Nino conditions also pose downside risks.

 

Not only is the CPI inflation target "not in abeyance" it is also "sacrosanct", Malhotra said. "We have to look at it over a little longer period. It is not possible or desirable to have it pegged in a very small range, and that's why we have this range," Malhotra said.

 

Considering the geopolitical situation, the central bank will be dependent on the incoming data while deliberating on interest rates going ahead. "We have to watch and see as to whether there's shock in supply," the RBI Governor said. The RBI is monitoring the war situation – whether the war is going to persist or going to wane away. The central bank " will be very watchful if inflation is getting generalised, building into expectations," Malhotra said. 

 

The RBI Governor, however, admitted that the current scenario posts an adverse case for interest rate hike than ealier. Asked if the possibility of a rate hike was discussed in the meeting, Malhotra said the purpose of Monetary Policy Committee meeting is to discuss all possibilities on interest rates.

 

For its inflation and growth forecasts, the central bank has assumed crude oil prices for FY27 at $95 per barrel, higher than the $85-per-barrel estimate assumed in April. Global crude oil prices have averaged around $100 per barrel in the last two months, much higher than sub-$73 a barrel before the war broke out. According to Malhotra, crude oil prices in FY27 are expected to average "substantially higher" than what was assumed during the Monetary Policy Committee's meeting in April.

Despite the crude oil price shocks, India stands in a better place compared to other nations, Malhotra said. Having said that, the Monetary Policy Committee is closely watching the restoration of crude oil supply and the impending monsoon. The committee is also monitoring the pass-through of higher prices to consumers, the governor said.  End

 

Reported by Shweta

Edited by Deepshikha Bhardwaj

 

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