The Reserve Bank of India (RBI) has decided to maintain its key interest rate at 5.5% during its recent meeting. This decision aligns with predictions from economists amid rising global economic challenges.
Interest Rate Decision
At the recent RBI meeting, it was decided to keep the interest rates at 5.5%. Governor Sanjay Malhotra noted that the previous 50 basis points cut limited the scope of monetary policy needed to support economic growth.
Inflation and Growth Projections
The RBI expects inflation in 2025 to remain significantly below its target of 4%. In June, inflation registered at 2.1%, marking a six-year low. The Monetary Policy Committee suggests that food price volatility could influence inflation levels in the fourth quarter of 2025.
Geopolitical Challenges and Trade Relations
Governor Malhotra pointed to global trade challenges faced by India, especially in light of Trump's threats to impose tariffs. India has also come under international scrutiny for its energy deals with Russia, prompting the Ministry of External Affairs to accuse the U.S. and EU of hypocrisy.
The RBI's decision to maintain interest rates and its assessment of the current economic conditions highlight the importance of monitoring external factors. Growing global uncertainties and inflationary challenges remain a focal point for the bank.
