New Delhi: India’s central bank Governor Sanjay Malhotra said recent macroeconomic data reinforces the case for a cut in the benchmark rate, triggering a drop in bond yields.
The nation’s consumer price index rose 0.25% in October from a year earlier, the lowest since the current CPI series began in 2012, and markets expect the central bank to cut rates at its policy review on on Dec. 5. The central bank has lowered the benchmark repurchase rate by 100 basis points since February but held steady in October.
“The monetary policy committee had signaled the scope of further rate cuts in October and the latest data and macro indicators reinforce the belief that there is definitely scope,” Malhotra told Zee Business television channel in an interview. “It is up to the MPC to decide on rates in the coming policy.”
The benchmark 10-year bond yield fell four basis points to 6.48% after the comments.
Economists said inflation will now likely undershoot the Reserve Bank of India’s forecast of 2.6% for the fiscal year through March 2026, and come in well below the 4% target. The central bank has forecast inflation will rebound to 4% next quarter as favorable base effects fade.
RBI Governor Sees Scope To Cut Policy Rate In December
Malhotra said the rupee’s recent weakness is a natural outcome of inflation gap with advanced economies. A 3%–3.5% annual drop is typical for the currency, he added, noting that the RBI’s focus is on containing excessive volatility rather than defending any specific level.
The rupee, which hit a new fresh low against the dollar on Friday, is Asia’s worst performer this year, having weakened about 4% versus the greenback.
