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. .
