Reserve Bank of India (RBI) governor Sanjay Malhotra said bringing down interest rates were an ``appropriate’’ monetary policy action with headline inflation expected to align with the medium-term target of 4 per cent, according to the minutes of the monetary policy committee (MPC) report released on Friday.

The interest rate setting panel had after a three-day meeting that commenced on February 5 reduced the policy repo rate by 25 basis points to 6.25 per cent after a gap of five years. All the six members of MPC had voted in favour of the cut.

"Given the macroeconomic outlook when inflation is expected to align with the target, and recognising that monetary policy is forward-looking, I view a lower policy rate to be more appropriate at the current juncture," Malhotra said.

The RBI governor added that domestically, there is a need to preserve the high growth momentum, while maintaining price stability.

RBI deputy-governor M. Rajeshwar Rao said at the current juncture, with a further alignment of headline inflation towards the 4 per cent target, there is a greater space to address concerns regarding growth by way of reduction in the policy repo rate.

"This monetary policy measure in conjunction with the fiscal measures announced in the budget should give a fillip to aggregate demand conditions. Furthermore, the government has reaffirmed its commitment to fiscal consolidation, which should help to anchor medium-term inflation expectations," he added.

RBI executive director and panel member Rajiv Ranjan said in line with the sequencing path that the RBI followed, a policy rate cut in February 2025 is the most rational and appropriate next step as it now has greater confidence on the disinflation path.

External member Nagesh Kumar was the only one who considered the possibility of a higher rate cut.

“I strongly feel that the MPC should begin the process of normalisation of the monetary policy with a rate cut. We could be more ambitious and target a 50 basis point cut. It would send a signal to the markets and private investors within and outside the country that India is serious and would do whatever it takes to revive economic growth momentum.”

But after saying this, he opted to err on the side of caution – and plumped for a 25 basis point cut like the others on the MPC because of “global uncertainties”.