Signage of the Reserve Bank of India (RBI) on Friday, April 5, 2024, in Mumbai, India.
Dheeraj Singh | Bloomberg | Getty Images
India’s central bank is expected to keep its benchmark interest rate unchanged at 6.50% on Friday as it struggles to curb rising inflation without hurting growth in Asia’s third-largest economy.
The decision was in line with expectations among economists in a Reuters poll as consumer price inflation in India Surge to 14-month high 6.21% In October, it was significantly higher than the Reserve Bank of India’s 4% target and also above its 6% tolerance limit.
The Reserve Bank of India has kept interest rates steady since February last year, but India’s economic growth has slowed more than expected, making the central bank’s task even more difficult.
From July to September, India’s economy An increase of 5.4% compared with the same period last yearwell below the 6.5% forecast of economists polled by Reuters and the slowest growth rate in nearly two years.
The slowdown has fueled concerns that the Reserve Bank of India’s restrictive policies could put the economy at risk of falling short of the 7.2% growth forecast through March 2025.
Both Finance Minister Nirmala Sitharaman and Trade Minister Piyush Goyal They reportedly called for lower borrowing costs to boost borrowing demand and support a slowing economy.
“As we look to industries to scale up and build capacity, bank rates must become more affordable,” the finance minister said. At an event in Mumbai last month.
However, central bank governor Shaktikanta Das ruled out an immediate rate cut, even as the central bank shifted its policy stance to “Neutral” comes from Tighter “withdrawal of accommodation” was proposed at the October meeting.
Das, whose second term at the central bank ends later this month, had said in October that interest rates could be cut immediately. “very early” and “Very, very dangerous”and he is in no rush to join the easing policies of global central banks.
The Indian rupee fell to a record low against the dollar earlier this week, London Stock Exchange data showed, and any monetary easing measures could put further pressure on the currency and could trigger capital outflows. Rupee last traded at 84.659 against the US dollar.
The benchmark Nifty 50 index has edged higher since GDP was released on Friday and is up 13.7% since the start of the year. By comparison, the MSCI Asia ex-Japan index, which allocates nearly 23% to India, is down about 12% year to date.
Indian bonds have risen in the past few days, with the 10-year benchmark yield falling to 6.677% on Thursday, the lowest level since February 2022, London Stock Exchange data showed. Following Friday’s RBI decision, the 10-year government bond yield rose 3.1 basis points to 6.711%.
—CNBC’s Amala Balakrishner contributed to this report.
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