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RBI Clarification: No immediate rate cut likely, inflation a concern

Clarifying speculation that the RBI will also cut rates amid the possibility of another rate cut at the US Fed meeting to be held this weekend after the victory of Donald Trump in the US presidential election, RBI Governor Shaktikanta Das said that a neutralization of the monetary policy stance would lead to a cut in interest rates during the next MPC meeting. Doesn't make sense. He further added that the perception that the next step will be a rate cut because we have changed the attitude is wrong. A ratecut is not possible only through a change in attitude. He clarified this while addressing the BFSI Insight Summit. RBI has kept interest rates unchanged for the past two years and adopted a neutral stance during the last meeting. Due to which, the speculation of rate cut in the next meeting became intense. Das said the next step will be taken cautiously considering the inflation risk. According to the RBI some of the risks include geopolitical tensions, geoeconomic tensions, climate and weather related risks and high commodity prices. GDP growth data mixed but positive factors More country's economic growth figures are mixed but positive factors have reduced the impact of negative factors. Addressing the BFSI event, Das asserted that overall economic activity is strong. Many experts expressed concern over growth after official data showed growth at 6.7% in the first quarter of fiscal 2025, a 15-quarter low. However, the RBI has maintained its economic growth forecast of 7.2% for FY2025.

Image Credit: (Divya-Bhaskar): Images/graphics belong to (Divya-Bhaskar).

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