RBI keeps rates stable, says policy will remain restrictive as Indian economy thrives From Investing.com


Investing.com– The Reserve Bank of India kept interest rates stable on Thursday as widely expected, and said it will continue to focus on controlling inflation amid accelerating economic growth in the country.

The RBI held at 6.5% for the fifth consecutive meeting, after signaling the end of the rate hike cycle in mid-2023.

Governor Shaktikanta Das said in a live stream that the bank will continue to maintain a stringent policy to bring inflation more in line with its 4% target. Das further noted that the Indian economy is expanding at a rapid pace and is likely to continue to outpace its global counterparts in the coming years.

The RBI governor has forecast real gross domestic product (GDP) for the current fiscal year to March 31, 2024, at 7.3%. Real GDP growth for fiscal 2025 is forecast at 7%, with the Indian economy set to far outperform its global peers.

India has been the fastest-growing large economy over the past two years, amid rising government spending and foreign investment. Consumer spending, particularly in India’s urban centers, has also been a key driver of growth.

But Das noted persistent risks from inflation and stressed the need to keep inflation balanced and under control to facilitate continued economic growth.

The RBI’s decision comes just days ahead of India’s expected price pressure to remain persistent and well above the RBI’s 4% annual target in January.

Food price inflation, particularly of vegetables and grains, remained a key point of contention for Indian inflation, after erratic monsoons through 2023 triggered shortages in some parts of the country.

“The trajectory of inflation going forward will be shaped by food inflation, over which there is considerable uncertainty,” Das said.

Das said CPI inflation is expected at 5.4% for the current fiscal year and 4.5% for fiscal 2025, assuming a stable monsoon.

The stock index rose 0.1% after the RBI decision, while the stock index flounders.

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