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RBI MPC Member: Interest Rates Unlikely to Rise
25 Feb
Summary
- Interest rate hikes are deemed negligible by an RBI MPC member.
- Inflationary pressures from geopolitical events and commodity prices noted.
- Credit growth to large corporates and MSMEs has shown significant improvement.
Interest rates are unlikely to increase in the near future, according to Saugata Bhattacharya, an external member of the Reserve Bank of India's Monetary Policy Committee. He noted that despite building inflationary pressures from geopolitical tensions, weather risks, and rising commodity prices, the chances of a repo rate hike are negligible. Bhattacharya confirmed that the MPC unanimously voted to keep the repo rate unchanged at 5.25 percent during the recent policy meeting.
The Indian economy shows no signs of overheating despite stimulus measures, with credit growth to large corporates rising to 7.5 percent year-on-year as of December 2025. Credit to mid-corporates and MSMEs has also seen substantial growth, increasing by 20 percent and 29 percent year-on-year, respectively. Capacity utilization is around 75 percent, indicating room for expansion.
Domestic consumption is projected to remain the main driver of GDP, though both domestic and external demand are crucial for sustained growth. High-frequency indicators, including manufacturing and services PMIs, strong merchandise exports, and robust e-way bill data, point to firm economic activity. The RBI anticipates CPI inflation to move towards the 4 percent target in H1 FY27, partly due to base effects reversing from FY26.
