RBI MPC Cuts Rates: 'Risk Management' Amid Low Inflation, Not Growth Fears

• RBI MPC implemented a 25-basis point rate reduction in December as a 'risk management' measure.
• The decision was driven by significantly low inflation and ample spare capacity, not concerns over growth.
• Capacity utilization at 74-75% is well below the 80% threshold where inflationary pressures typically build.
• Robust H1 FY26 growth did not translate into price pressures, strengthening the case for a proactive rate cut.
• Rupee volatility was not central to the decision; currency movements are driven more by growth than interest rates.

Why It Matters: MPC's rate cut was a calibrated 'risk management' move, balancing low inflation with stable growth.