The waiting game: RBI has done well to hold its horses

RESERVE BANK OF India (RBI) Governor Sanjay Malhotra has done well to refrain from immediate rate action, despite bond markets having anticipated one.

- SHOBHANA SUBRAMANIAN

His message—dovish yet circumspect—appears prudent. While he flags the possibility of a demand shock, the central bank’s forecasts stop short of sounding alarmist.A rate hike at this juncture would have offered little relief. The economy is already grappling with a sharp oil shock, and the disruptive effects of the West Asia conflict are unlikely to dissipate anytime soon. Even absent the recent ceasefire, holding policy steady would have been the wiser course, rather than risking a reversal later. With multiple uncertainties in play, maintaining a neutral stance preserves policy space — dry powder for when it is truly needed. In any case, with oil prices easing to around $93-94 a barrel and curbs on banks’ net forex positions in place, the rupee has recovered some lost ground. Lower oil prices, softer global yields, and the policy stance have also helped calm bond markets, with the benchmark yield closing below 7%.