Sanjay Malhotra’s appointment as the new RBI governor “cements” the possibility of a rate cut in February.
The Government of India has appointed Revenue Secretary Sanjay Malhotra as the 26th Governor of RBI.
The appointment of Sanjay Malhotra as the new RBI governor “cements” the possibility of a rate cut at the next policy review in February, analysts said on Tuesday.
Outgoing RBI Governor Shakti Kanta Das He said he was “sticking to his guns” on rates as seen in the December 6 meeting where the rate-setting panel, headed by him, kept rates unchanged.
Government of India has appointed Revenue Secretary Sanjay Malhotra As the 26th Governor of RBIEffective Wednesday. The Appointments Committee of the Cabinet approved his name for the prestigious post, Malhotra has been appointed for a three-year term.
Monetary policy will be “more accommodative” under Sanjay Malhotra
Monetary policy under Malhotra, also a career bureaucrat, will be “more accommodative”, analysts at Japanese brokerage Nomura said, with a rate cut “cemented” at the February meeting.
RBI Rate Cut Expectations February 2025
The growth rate is expected to decrease.
The brokerage added that a slowdown in growth is also guaranteed in the next meeting.
Govt-RBI split on monetary policy
Over the past few weeks, a “sharp divide” appears to be emerging between the government and the RBI over the need for countercyclical monetary policy, the brokerage said, with both Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal at the RBI. Criticized. To keep the policy strict.
Domestic brokerages are weighted.
Domestic brokerage firm MK said it “doesn’t rule out” a rate cut in February but would be more comfortable taking a firm call closer to the policy window.
Sanjay Malhotra’s appointment reflects the government’s priorities.
He noted that the decision to appoint Malhotra came down to the wire, and showed the government’s comfort in having a bureaucrat rather than a technocrat head the RBI.
A Limited Insight into Sanjay Malhotra’s Economic Thoughts
Almost all analysts said little was known about Malhotra’s economic views, and MK cited his interactions with bankers as being straightforward in policy communication, and in the financial services department. In his past role, he would push banks to adapt. And focus on technology.
Market concerns about government influence
“With a new governor coming from the finance ministry, market participants may be inclined to think that this could lead to a stronger role for the government in monetary policy decisions,” said analysts at Swiss brokerage UBS. “
Balancing growth and inflation risks
Malhotra will have to balance growth risks and the recent rise in headline inflation, he said, adding that Das has maintained the RBI’s autonomy, helped strengthen relations with the government, ensured financial stability. Made (especially during the pandemic shock), and focused on financial inclusion and digital innovation.
Upcoming meetings and potential market volatility
Malhotra’s appointment came as a surprise to financial markets, adding that a new RBI deputy governor in charge of monetary policy will be appointed in January to replace Michael Patra.
MPC formulation and growing global uncertainty
It said five of the six members of the Monetary Policy Committee (MPC) are relatively new — three new external MPC members joined only in October 2024 — amid growing global uncertainty over the Trump administration’s tariff proposals. May increase volatility in mid-markets.
Outlook for policy rate cuts
“..we maintain our view that higher real policy rates and easing rates may create scope for the RBI to cut the repo rate to 0.75 percent starting February 2025,” the brokerage added. Ideology regardless of who it is. in the rudder.
(with PTI input)