Rate cut at this stage could be 'risky, premature': RBI guv

Reserve Bank of India (RBI) Governor Shaktikanta Das cautioned on Friday that cutting the policy rate at this juncture could be "very premature" and "risky" in light of an uptick in the latest headline inflation reading, something that could persist until the next print, as well.

- SUBRATA PANDA

"...(A) rate cut at this stage will be very premature and can be very, very risky when your inflation is 5.5 per cent and the next print is also expected to be high, you can't be cutting your rate, more so if your growth is also doing well," said Das at Bloomberg's India Credit Forum.

He signalled that the RBI would only consider rate cuts once inflation is durably aligned with the 4 per cent target. "I would not like to speculate on a rate cut in advance. We will need to wait for incoming data," he emphasised.

The RBI's policy actions will remain forward-looking, depending on the inflation outlook. "We have to see what is the outlook on inflation for the next six months or one year... (and) based on that we would take action," Das said.

Earlier this week, RBI Deputy Governor Michael Debabrata Patra indicated that retail inflation may durably align with the 4 per cent target by FY26.

Last week, the reconstituted Monetary Policy Committee (MPC) left the repo rate unchanged for the 10th straight meeting, shifting its stance to "neutral", fuelling speculation of a potential rate cut in December.

However, driven by a spike in food prices and a fading base effect, September's retail inflation read a nine-month high of 5.49 per cent, tempering market expectations.