Tariff fog clouded RBI rate call: Minutes

The external members of MPC highlighted global uncertainties as a reason to hold back on further rate cuts

- Shayan Ghosh

When the rate-setting committee of the central bank met two weeks ago, an uncertain global environment brought about by the tariff tantrums of US president Donald Trump loomed large. It forced the six-member panel to unanimously vote for a status quo on interest rates, despite a benign inflation, showed minutes.

"Considering all these, especially the current state of uncertainty on the external front, monetary policy needs to remain watchful," said governor Sanjay Malhotra, according to the minutes of the meeting released by the Reserve Bank of India (RBI) on Wednesday.

Malhotra put forth four reasons behind his decision to vote for a pause in interest rates. First, the global economy, he said, continued to undergo a period of heightened uncertainty on the back of trade and tariff negotiations. Second, while economic growth, projected at 6.5% in FY26, is resilient, uncertainty in external demand remained a major drag on growth. Third, inflation continued to ease but was primarily on account of softening food prices. Lastly, the transmission of recent policy rate cuts is ongoing.