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RBI keeps repo rate unchanged but signals a potential shift in stance as inflation remains elevated. Core inflation eases and global rate cuts prompt RBI to consider policy adjustments.
RBI Keeps Repo Rate Unchanged, Signals Shift to Neutral Stance
The RBI held the repo rate at 6.50% during its Monetary Policy Committee (MPC) meeting, marking the ninth consecutive bi-monthly meeting with no rate change. RBI Governor Shaktikanta Das noted that inflation is expected to remain elevated during September and October, driven by rising food prices.
Easing Core Inflation Prompts Policy Review
Despite the inflationary pressure, easing core inflation and global central banks reducing borrowing costs have prompted the RBI to shift towards a neutral stance, signaling the possibility of rate cuts. Core inflation, which excludes food and fuel, has remained below 4%, allowing the central bank more flexibility in future policy decisions.
Global Influence on Rate Cuts
With global central banks like the Federal Reserve and the Bank of England cutting rates, pressure is mounting on the RBI to maintain rate differentials crucial for the rupee’s exchange rate. However, analysts caution that domestic inflation trends will ultimately guide the RBI’s monetary policy