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You are at:Home » RBI’s MPC faces global uncertainty and weighs inflation targets against the risk of financial instability
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RBI’s MPC faces global uncertainty and weighs inflation targets against the risk of financial instability

Adnan MaharBy Adnan MaharFebruary 8, 2025No Comments3 Mins Read0 Views
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The parliamentary order to the Reserve Bank of India’s Monetary Policy Committee is to target inflation at 4% with growth in mind. However, US President Donald Trump has posted financial instability on the table. Reporate cuts, the rates that central banks lend to banks have been reduced by a quarter point to 6.25% thanks to the Finance Office, delivering it to 6.25%. . The scale or lack of it raises questions about the future path of the cost of funds.

Confident in its downward inflation trajectory and the need to support economic growth, the MPC could have probably brought about half a point cut and a change in financial stance. However, a neutral attitude shows that it is a beliefless cut amid global uncertainty.

“The higher concern for us is global uncertainty and how it will pan out,” he said at a press conference after the MPC decision. “Even if the tariff and trade war does not pan out, it is only concerned about its own uncertainty, as it will have a direct impact on growth, investment decisions and consumer spending.”

Certainly, the MPC is not only working on the fallout of the new world order. Even Jerome Powell of the Federal Reserve is thinking about what his political boss is doing. Governor Malhotra was very open.

President Trump has introduced this uncertainty in his economic model, but is not designed to take into account conflicting behaviors in a matter of hours. And it is still designed how countries facing tariffs will react to remake trade tactics. If only the abundant monsoon and government actions would have an impact on inflation, then the MPC would certainly have been comfortable proposing a point reduction of half the rate. But that’s not true. Malhotra’s Day pointed out imported inflation – which exactly holds back Fed Chairman Powell. The US market is not only taking into account the decline in the Fed’s funding rate, but others are also working on the assumption that Indian inflation could exist through crude oil. But even that dynamic has been shifted with Trump’s “drill baby drill” policy on increasing energy production that works in India’s favor.

Global trade, which looks at dysfunction, has dominated financial markets. The currency is stunned. Yields are rising sharply.

The Indian rupee is no exception. It slides into new low-rise every day. It is unlikely that there will be any relief in the front line, which will reduce the maneuverability of the MPC in the near future.

“We are pleased to announce that Gaurus Sengupta, an economist at IDFC First Bank,” said: “We expect the rate cut cycle to be shallow given the depreciation pressure on INR.”

Consumers and investors are often scattered like drunk sailors, which is considered commonplace in normal times, but can suddenly stop. When that happens, the only weapon to attract or suppress funds is interest rates, and the RBI does not want to be slowed down by sudden cuts. Growth and inflation dominate the general narrative, but stability comes first over others as it can undermine the very growth that everyone is aiming for, for financial policymakers. .



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Adnan Mahar
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Adnan is a passionate doctor from Pakistan with a keen interest in exploring the world of politics, sports, and international affairs. As an avid reader and lifelong learner, he is deeply committed to sharing insights, perspectives, and thought-provoking ideas. His journey combines a love for knowledge with an analytical approach to current events, aiming to inspire meaningful conversations and broaden understanding across a wide range of topics.

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