Investing.com – The Reserve Bank of India kept interest rates unchanged as widely expected and reiterated that it will continue to withdraw its easing policy to ensure that inflation falls.
The central bank slightly lowered its forecast for this quarter but maintained its forecast for full-year GDP.
The Reserve Bank of India held interest rates at 6.5% for the eighth consecutive meeting, in line with expectations.
Governor Shaktikanta Das said the central bank will continue to withdraw its easing policy, paying special attention to the recent pickup in inflation.
India’s inflation rate unexpectedly rose to 5.1% in June, with food remaining the main driver of prices, although weak oil prices have led to lower fuel costs and service sector inflation has eased.
The Reserve Bank of India expects inflation to slow in the third quarter and end the year at a range of 4% to 4.5%.
Speaking on a live broadcast, Das said there were no immediate plans to begin easing policy, a stark contrast to the dovish signals the Fed has sent out in recent weeks.
The Reserve Bank of India governor did not comment on the recent weakness in the rupee, which measures the number of rupees needed to buy a dollar, surged to a record high of over 84 rupees this week.
Das said the rupee has remained largely stable in recent months, underscoring the stability of the Indian economy.
Reserve Bank of India expects first-quarter GDP to weaken slightly, but growth to remain on track in 2024-25
Das said India’s economy is now expected to grow 7.1% this quarter, down from an initial forecast of 7.5%, citing headwinds from weak corporate profitability, government spending and output in core industries.
However, the economy is still expected to grow by 7.2% this fiscal year, maintaining strong growth for three consecutive years.
India’s economy is the fastest growing major economy, a trend that has attracted a large number of foreign investors into its market, triggering a sharp rise in the Indian stock market.
But after the Reserve Bank of India meeting on Thursday, India’s stock market benchmark indexes fell around 0.5%, and the rupee also weakened slightly.
