‘Only rate hike or pause ahead’: RBI Governor rules out rate cut in near-term

The Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC) has signaled a hawkish stance by raising the repo rate by another 25 basis points (bps) to 5.50% on Wednesday. This move, part of the MPC's 'calibrated tightening' strategy, indicates that the era of easy money is far from over and borrowers should prepare for more challenges.

RBI Governor Sanjay Malhotra stated that rate cuts are not on the table in the near-term, and policy actions can only involve a rate hike or a pause, depending on changing conditions. With borrowing costs already high, another rate hike would add pressure on households, businesses, and the struggling economy. The central bank's actions prioritize inflation control over growth and credit demand, which could be particularly difficult for consumers and businesses with existing debt.

The MPC's decision to continue tightening policy indicates that another rate hike might be considered at the December policy review, depending on the economic conditions and underlying inflation.