MUMBAI – The Reserve Bank of India has maintained its key lending rate at 6.5 percent, a decision that was widely anticipated. The decision comes as concerns about inflation resurface due to higher-than-usual seasonal spikes in food prices in recent weeks.
In an unanimous decision, the monetary policy committee (MPC) decided to keep the repo rate unchanged for the third consecutive time. However, the central bank did tighten liquidity conditions by temporarily increasing the cash buffer that banks must hold.
Since May 2022, India has raised rates by 250 basis points in an effort to curb rising prices. The country experienced a spike in food prices in June, driven by monsoon season conditions, causing headline inflation to increase and break a four-month downward trend. Analysts predict that inflation reached 6.4 percent in July, surpassing the RBI’s comfort band of 2 percent-6 percent.
Following the RBI’s decision to maintain rates, the Indian rupee weakened slightly against the U.S. dollar, with rupee forward premiums dropping.
RBI Governor Shaktikanta Das stated that the central bank will continue with its policy stance of “withdrawal of accommodation” in order to align inflation with the committee’s target while supporting economic growth. Five out of six committee members voted in favor of this stance.
While the benchmark 2033 bond yield briefly rose after the liquidity measure, it quickly eased as the governor assured that the measure was temporary.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
Denial of responsibility! Samachar Central is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
