India’s central bank is signalling that interest rates are likely to remain low for an extended period, even as policymakers assess the potential growth impact from evolving U.S. trade arrangements. Reserve Bank of India Governor Sanjay Malhotra said recent projections suggest policy settings should remain low for a long period of time, according to comments reported by the Financial Times.
Malhotra’s remarks reinforce the RBI’s cautious stance as it balances moderating inflation against emerging external risks. While domestic price pressures have eased from recent peaks, the central bank appears reluctant to tighten prematurely, particularly as global growth uncertainties continue to cloud the outlook.
One such risk highlighted by the governor is the potential economic impact of a U.S. trade deal. Malhotra said changes to trade arrangements could impact by as much as around half a percentage point on India’s growth, underscoring the sensitivity of Asia’s third-largest economy to shifts in global trade flows and external demand. While details of the trade impact remain limited, the comments suggest the RBI is factoring external risks into its policy calculus.
The signal of rates staying low for a prolonged period aligns with the RBI’s broader messaging that policy should remain supportive as growth normalises. A prolonged accommodative stance would help cushion the economy against external shocks while allowing policymakers to monitor how trade developments, capital flows and global financial conditions evolve.
For markets, Malhotra’s comments push back against anyone with expectations of near-term policy tightening and reinforce the view that India is likely to lag some global peers in normalising rates. Lower-for-longer guidance may also help anchor borrowing costs for households and businesses, supporting investment and consumption amid an uncertain external backdrop.
While the RBI has stopped short of providing explicit forward guidance, the emphasis on risks and the need for patience suggests the bar for rate hikes remains high
