RBI MPC Minutes: Governor Malhotra Says Macroeconomic Stability Key At Current Juncture

Reserve Bank of India Governor Sanjay Malhotra said that macroeconomic stability remains the priority as the central bank balances growth support with inflation control, according to the Monetary Policy Committee minutes from the February 2025 meeting. The 25 basis-point cut was taken in response to this improving inflation outlook while ensuring that growth remains supported.

Malhotra, chairing his first policy review meeting as the RBI governor, said that while inflation is moderating, the external environment remains uncertain, requiring policy flexibility. He stated that stronger macroeconomic fundamentals and a resilient policy framework would help India navigate global risks while maintaining domestic economic stability.

“In a world order dominated by continuing geopolitical tensions and elevated trade and policy uncertainties, monetary policy, as the guardian of macroeconomic and financial stability, is traversing through a challenging time,” Malhotra said.

He added that India’s growth momentum needs to be preserved, and monetary policy must use various tools to maintain inflation-growth balance.

The 25-basis-point rate cut was part of a structured policy sequence, according to RBI Executive Director Rajiv Ranjan. The repo rate cut to 6.25% followed earlier policy steps, including the shift to a neutral stance in October 2024 and liquidity infusion in December 2024.

Ranjan said the rate cut was the next step in the RBI’s phased approach to policy adjustments. He said the central bank had first shifted its stance from ‘withdrawal of accommodation’ to ‘neutral’ in October 2024, followed by a Cash Reserve Ratio reduction in December 2024 to improve liquidity.

“In line with the sequencing path that we followed, a policy rate cut in February 2025 is the most rational and appropriate next step as we now have greater confidence on the disinflation path,” he said.

The MPC minutes indicate that fiscal and monetary policies are now aligned to support growth while maintaining price stability. Deputy Governor M Rajeshwar Rao said that the rate cut, along with fiscal measures in the Union Budget, would support aggregate demand.

“This monetary policy measure, in conjunction with fiscal measures announced in the Budget, should give a fillip to aggregate demand conditions,” Rao said.

The minutes also said that the government capex and tax relief measures will aid recovery, while monetary policy easing will lower borrowing costs and improve credit flows. The RBI noted that higher capital expenditure and improved corporate balance sheets would help drive private investment.

The MPC minutes further indicated that future policy decisions will be based on inflation trends, growth momentum, and external risks. Malhotra said the MPC will remain watchful in an uncertain global environment, and policy flexibility will be maintained.

The next MPC meeting is scheduled for April 7-9.