RBI policy communication caught in ‘chalk and cheese’ dilemma, says SBI report

The Reserve Bank of India’s recent policy communications have presented contrasting signals on inflation and interest rates, creating a “chalk and cheese” dilemma for markets, according to an SBI Research report released on Monday.

The report examined the minutes of the Monetary Policy Committee’s August meeting, the monetary policy statement and RBI Governor Sanjay Malhotra’s accompanying remarks. It found divergent tones across the three communications despite all originating from the same institution.

Soumya Kanti Ghosh, Group Chief Economic Adviser at the State Bank of India, said the latest MPC minutes appeared more hawkish, placing greater emphasis on inflation risks and leaving open the possibility of further monetary tightening.

In contrast, the Governor’s statement reflected a more patient and data-dependent stance, with relatively greater attention given to economic growth and financial conditions, the report said.

The divergence was particularly evident in the treatment of monetary policy, interest rates and inflation. While the MPC minutes gave greater weight to risks that could affect the future course of rates, the Governor’s communication appeared to moderate those concerns.

SBI Research quantified the difference by assigning the Governor’s statement an index value of one. On this basis, the hawkishness of the MPC minutes stood at 1.76 in June 2026 and increased to 1.82 in August. A figure above one indicated a more hawkish policy tone.

The contrasting signals have left investors uncertain about whether the MPC minutes indicate that an interest rate increase in October remains possible or whether the Governor’s cautious, wait-and-watch position should guide market expectations.

The report said the window for a rate increase had opened but maintained that any such decision remained finely balanced because of global and domestic uncertainties.

It pointed to resilient US economic growth, supported by consumer spending and investment in artificial intelligence, while noting that downside risks persisted.

Domestically, the report identified the erratic and uneven progress of the monsoon as a key concern. It suggested that the immediate priority should be to address monsoon-related risks through carefully designed domestic measures supporting the rural economy.

With PTI inputs