India’s central bank holds key interest rates from its seventh consecutive policy meeting on Friday as economic growth is expected to be strong while economic growth exceeds its 4% target .
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India’s headline inflation immersed at 4.31% in January for the third consecutive month compared to the previous year, adding more room for financial easing after the central bank was cut for the first time in nearly five years last week.
January’s measurements were the lowest since August 2024, down from 4.6% expectations from economists voted by Reuters.
Price growth has cooled completely, but food price inflation has dropped significantly from 7.69% in December to 5.68% in January. The growth in annual vegetable prices resulted in a greatest decline from 26.56% in December to 11.35% in January.
“A future view, good soil conditions, healthy reservoir levels and high foundations mean we hope food inflation will continue to slow down in the coming months,” says economist at consulting capital economics. Harry Chambers said. “And as the economy is in a softer patch, underlying price pressure remains curtailed.”
The decline in inflation could clear another path to interest rate reductions by the Reserve Bank of India, which reduced the economy’s speed by reducing the repository rate from 6.5% on Friday to 6.25%.
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While RBI is currently facing a dilemma as it seeks to support growth in Asia’s third largest economy, interest rate cuts aimed at stimulating growth could weaken the rupee, and this month It first achieved a record drop and is under pressure because it is stronger. Dollar.
However, India’s currency has been strengthened over the past two days due to intervention by the central bank.
RBI Governor Sanjay Malhotra said in a statement that the decision to cut interest rates depends on lower inflation.
Government estimates that the full year growth for the fiscal year ending in March 2025 is expected to be 6.4%. RBI also reduced its growth forecast for this fiscal year to 6.4%. This coincides with the government’s outlook. The bank continued to grow at 6.6% on previous estimates.
“These growth inflation dynamics will remain focused on targeting the MPC (Monetary Policy Committee) opening up policy spaces to support growth,” the central bank said Friday.
