SYNOPSIS
During the India Credit Forum hosted by Bloomberg, RBI Governor Shaktikanta Das expressed concerns over possibly cutting interest rates in the December upcoming Monetary Policy Committee (MPC) meeting. He emphasized that such a move would be "risky and premature" as India's economic growth remains stable, while inflation shows signs of moderation.
RBI Governor Shaktikanta Das, speaking at the India Credit Forum hosted by Bloomberg, stated that reducing interest rates in the upcoming Monetary Policy Committee (MPC) meeting in December would be "risky and premature." He highlighted that the nation's growth remains stable, with inflation expected to ease in the coming months.
Recently, the Reserve Bank of India's Monetary Policy Committee opted to keep the repo rate unchanged for oct at 6.5%. During a fireside chat, RBI Governor Shaktikanta Das emphasized that cutting interest rates at this point would be "premature and very risky." He reassured that India is not lagging in its monetary policy approach, stating, "The growth story remains strong, resilient, and inflation is moderating." He reiterated that a rate cut at this stage poses significant risks. RBI Governor Shaktikanta Das further remarked that any decision on rate cuts in the December MPC meeting would depend on upcoming data and the overall inflation outlook.
October Inflation Expected to Stay Elevated
India's retail inflation surged to a nine-month high of 5.49% year-on-year in September, primarily driven by rising vegetable prices and a lower base from the previous year. This follows a sharp decline in August when inflation dropped to a five-year low of 3.65%. The jump in retail prices for September marks the first time since July that inflation has exceeded the Reserve Bank of India's (RBI) medium-term target of 4%.
What is Inflation?
Inflation is the rate at which the general price level of goods and services in an economy rises over time. It means that, as prices increase, the purchasing power of money decreases—essentially, you can buy less with the same amount of money. Central banks i.e. RBI, monitor the inflation to keep it in check and ensure the economy remains stable.
Conclusion
RBI Governor Shaktikanta Das has signaled caution regarding interest rate cuts, citing stable growth and moderating inflation. Any decision in the upcoming MPC meeting will hinge on incoming data and the overall inflation outlook, keeping the central bank's focus on economic resilience.
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