RBI Signals Flexibility but Keeps Inflation in Check
Introduction: RBI Prioritizes Inflation Control
At the latest Monetary Policy Committee (MPC) meeting, RBI Governor Shaktikanta Das stressed that India cannot afford another surge in inflation. He advocated for policy flexibility until inflation aligns with the central bank’s 4% target. The MPC voted 5-1 to maintain the benchmark repo rate at 6.5% for the tenth consecutive meeting, underscoring the RBI’s cautious approach amid global uncertainties.
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Balancing Growth and Inflation
Das emphasized that price stability is crucial for sustainable growth and suggested shifting the policy stance to neutralto provide room for future adjustments. He warned that risks like geopolitical tensions, commodity price fluctuations, and adverse weather could disrupt inflation trends, making it essential to stay vigilant.
Diverging Views Among MPC Members
While most members supported holding rates, Nagesh Kumar proposed a 25-basis-point rate cut to boost private investment amid weak industrial demand. New members Saugata Bhattacharya and Ram Singh agreed with maintaining the rate but favored a neutral stance for more policy flexibility.
Global Factors to Watch
RBI Executive Director Rajiv Ranjan highlighted key uncertainties—U.S. elections, Chinese policies, and geopolitical risks—that may provide clearer insights by December. Deputy Governor Michael Debabrata Patra stressed that easing should only be considered when inflation nears the target.
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Conclusion: Inflation Control is the RBI’s Priority
Das made it clear that controlling inflation takes precedence over stimulating growth. The wait-and-watch approachreflects the RBI’s commitment to long-term economic stability, balancing inflation management with growth needs as uncertainties unfold.
Also Read: IMF Projects India’s FY25 Growth at 7%, Highlights Resilience Amid Global Headwinds