RBI monetary policy trapped in ‘chalk and cheese’ problem: SBI report

SBI Research highlighted a communication divergence in the RBI’s latest monetary policy cycle, with MPC minutes appearing more hawkish while Governor Sanjay Malhotra adopted a cautious, data-dependent stance. Markets now face uncertainty over a possible October rate hike amid domestic and global risks

New Delhi: 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, an SBI Research report said on Monday.

There were clear yet divergent signals from these three statements despite originating from the same institution/source, said Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India. “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,” Dr Ghosh argued.

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In fact, 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.

“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,” according to Dr Ghosh. The SBI report further argued that the policy dilemma for markets is, therefore, increasingly a “chalk or cheese” problem.

“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?” it 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,” the report mentioned.

Firstly, US economy showing resilient growth driven by consumer spending and artificial intelligence investment, but facing notable downside risks. Secondly, in terms of domestic conditions, 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.