24 August,2026 10:48 AM IST | New Delhi | mid-day online correspondent
RBI. File Picture
According to SBI Research, the Reserve Bank of India's (RBI) recent diverging statements seems to be puzzling, because the apex bank's monetary policy committee (MPC) minutes indicate possible tightening of rates, while the Governor Sanjay Malhotra's statement suggests a pause on the key rate revision.
RBI's mixed signals
The research states that the recent RBI monetary policy minutes, monetary policy press statement and RBI Governor Sanjay Malhotra's statement for August, and even earlier months, reveal the conundrum of "chalk and cheese" in monetary policy, as per news agency IANS.
According to Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India stating there were clear yet divergent signals from these three statements despite originating from the same institution/source.
"This is precisely the communication puzzle emerging from the RBI's latest policy cycle: the latest MPC minutes appear more hawkish, keeping inflation risks and the possibility of further tightening in focus while the Governor's statement sound considerably more patient and data-dependent," Ghosh stated.
The divergence is particularly pronounced in "policy and rates" and "inflation and prices", suggesting that the minutes attach greater weight to the risks most relevant for the future rate trajectory, whereas the RBI Governor's communication tends to attenuate these concerns and give relatively greater weight to growth and financial conditions, according to IANS.
"As a matter of fact, in terms of macro tones, if the Governor statement is indexed to 1, the MPC minutes statement is at 1.76 in June 2026 and it rises further to 1.82 in August 2026. A higher number relative to 1 indicates more hawkishness," Ghosh said.
Central Banks across the globe, including Reserve Bank of India, monitor the inflation situation and to contain the inflationary pressure, increase the key interest rates (repo rate). This helps to reduce the liquidity or the money that is readily available in the market, thus reducing the spendings and in turn the inflation. However, this move affects businesses as funding is not readily available and the cost of borrowing becomes higher.
So, the central banks while adopting a hawkish stance prioritise price stability over short-term economic growth. Conversely, Central Banks may prioritise economic growth over containing inflation and this approach is known as a dovish stance.
"Should investors read the hawkish undertone of the minutes as a signal that an October rate hike remains on the table, or follow the Governor's more cautious wait-and-watch communication?" the SBI research report noted.
"We believe, even though the window of a rate hike has now opened up, such a decision still hangs in delicate balance primarily because of two reasons," it added.
The report noted that US economy showing resilient growth driven by consumer spending and artificial intelligence investment, but facing notable downside risks. Moreover, it observed that the progress of monsoon is erratic and highly uneven.
"We thus suggest, it might be more important to now address monsoon risks through carefully crafted domestic policies addressing rural economy concerns," said the report.
(With inputs from IANS)
