The Reserve Bank of India (RBI) minutes from the early August meeting were more circumspect than Governor Sanjay Malhotra's public statements, according to Radhika Rao of DBS Group Research. With Deputy Governor Poonam Gupta adamantly opposing rate-cut expectations, the majority of members took a neutral to cautious attitude. Potential tightening risks are still present because the inflation outlook is dependent on monsoon performance, El Niño risks, and geopolitical developments.
Risk is tightened by the cautious tone of the RBI.
In contrast to the Governor's remarks at the rate review, the RBI's early-August policy meeting minutes, which were made public late on Wednesday, were more circumspect. According to statements in the minutes, four members favored a neutral-to-cautious stance, while the governor supported a pause but believed that widespread policy tightening measures were necessary if inflation continued to rise. Deputy Governor Gupta took a harsher stance, ending prospects of a rate cut.
"Members saw the inflation prognosis as dependent on the monsoon outcome, El Niño risks, and geopolitical developments, in addition to flagging early evidence of cost pressures seeping into categories."
"Investors may price in potential tightening risks in the run-up, as inflation is predicted to average well over 5% in the second half of FY27."
"Meanwhile, energy prices and changes in US rates are anticipated to have a greater impact on onshore markets' price action, with USD/INR's attempts to break above 96.0 attracting considerable counter activity."
"Rupee 1M volatility has substantially moderated this month, after peaking in June, notwithstanding these developments."
Risk is tightened by the cautious tone of the RBI.
In contrast to the Governor's remarks at the rate review, the RBI's early-August policy meeting minutes, which were made public late on Wednesday, were more circumspect. According to statements in the minutes, four members favored a neutral-to-cautious stance, while the governor supported a pause but believed that widespread policy tightening measures were necessary if inflation continued to rise. Deputy Governor Gupta took a harsher stance, ending prospects of a rate cut.
"Members saw the inflation prognosis as dependent on the monsoon outcome, El Niño risks, and geopolitical developments, in addition to flagging early evidence of cost pressures seeping into categories."
"Investors may price in potential tightening risks in the run-up, as inflation is predicted to average well over 5% in the second half of FY27."
"Meanwhile, energy prices and changes in US rates are anticipated to have a greater impact on onshore markets' price action, with USD/INR's attempts to break above 96.0 attracting considerable counter activity."
"Rupee 1M volatility has substantially moderated this month, after peaking in June, notwithstanding these developments."
