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The Reserve Bank is keeping a close vigil on whether and when supply shocks get embedded in the general price level, warranting monetary policy action, Governor Sanjay Malhotra has said amid persisting global uncertainties. Malhotra said the RBI has been maintaining a neutral stance since June 2025, which gives it the flexibility to remain nimble in approach and respond judiciously to incoming data and information. During a panel discussion titled 'Monetary Policy in a Time of Heightened Uncertainty' jointly organised by the Swiss National Bank (SNB) and the International Monetary Fund (IMF) in Switzerland last week, the governor said India is used to frequent supply shocks. Faced with supply shocks and uncertainty, it is important that policy frameworks focused on price stability are flexible enough to allow central banks to look through transitory shocks while remaining agile and nimble, maintaining a broad policy stance, and avoid making firm commitments on the future path of policy, the governor said. In such circumstances, broad approach is to be even more data dependent and to continuously reassess the balance of risks. Whether to look through or not depends on the duration of inflation and whether it is generalised in the economy, he added. Regarding the current energy shock, he said that the economy is confronted with a supply shock and it may be prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook.

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