Dec 6 2024: The Reserve Bank of India (RBI) kept its key interest rate unchanged on Friday but took steps to ease monetary conditions, responding to slowing economic growth and rising inflation. The RBI cut the cash reserve ratio (CRR) by 50 basis points to 4%, effective in two stages on Dec. 14 and 28. This move is designed to inject 1.16 trillion rupees ($13.72 billion) into the banking system and lower market interest rates.
India’s GDP growth unexpectedly slowed to 5.4% in the July-September quarter, the slowest pace in seven quarters, while inflation rose and the rupee hit record lows. Despite these pressures, the RBI opted to keep its benchmark repo rate at 6.50% for the 11th consecutive meeting, signaling a cautious approach to rate cuts.
RBI Governor Shaktikanta Das emphasized the importance of price stability for economic growth, noting that policy support may be needed if the growth slowdown persists. The central bank also revised its inflation forecast upwards to 4.8% for the current financial year, while lowering its growth forecast for March 2025 to 6.6%, down from 7.2%. Inflation risks remain, particularly food price pressures, which are expected to ease early next year.
To counter the rupee’s decline, the RBI raised the ceiling on interest rates for foreign currency non-resident (FCNR-B) deposits, aiming to attract foreign currency deposits and alleviate pressure on the currency.
