In the recently released MPC minutes, you have been quoted as saying: “In my assessment, not just higher inflation, (but) the risks of further inflationary pressures are accumulating.” Can you elaborate on this? Does that mean there is no scope for further rate cuts?
Several risks appear to be emerging. Early forecasts of El Nino conditions are likely to come. Prices of metals have increased sharply following large public and private investment in critical tech such as the fiscal stimulus for higher defence expenditure, supply-chain reconfiguration, and other strategic needs. Global growth prospects have improved, which will increase demand. However, there is little or no sign of any overheating in India as of now, but there is a need to monitor spillovers from global prices.
Do you think the retail-inflation rate would edge higher in the revised series?
It is likely to edge higher, but will be more or less in line with the forecasts in the MPC resolution, which were based on the earlier series. The average rate in the first half (H1) of 2026-27 is likely to be close to the target of 4 per cent.
How do you see the reverse transmission in the bond market following the rate cut of 125 basis points and the ₹6 trillion liquidity infusion?
I don’t wish to comment on the effects of the repo rate on the bond markets, except to say that the market interest-rate structure (the yield curve) is shaped by multiple factors like fiscal pressure, signals on external conditions — especially American Treasury yields — conveyed through forward curves, the perceived stage of the interest rate cycle, and more. The RBI’s liquidity operations have had secondary favourable effects on domestic yields.
As regards the recent external developments — the United States (US) Supreme Court striking down the President’s tariffs and then the 15 per cent global tariff announcement by the President — what will be their impact on domestic growth-inflation dynamics?
The US administration’s response to the court ruling seems to be still evolving. It is evaluating multiple options to impose compensatory tariffs under several laws. Many countries seem to be in wait-and-watch mode to see the final contours and the effects on their specific trade and tariff deals with the US. These include India. If the final tariffs are indeed lower, and monetary policy gets more space for liquidity easing, global growth and trade may get a boost. This will give India better export opportunities, and the resulting improvement in global certainties and confidence will hopefully have a positive effect on foreign investment-led capital flows to India.
 "Saugata Bhattacharya, external member of the Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC")
