RBI’s Decision Surprised Analysts

India has one of the largest economies in the world. Analysts, journalists, and policymakers from around the world closely monitor the situation in India.

They also closely monitored the country’s central bank’s latest meeting. The Reserve Bank of India (RBI) made an interesting decision on April 6. The central bank made the decision not to alter the interest rate.

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Interestingly, the country’s central bank held its benchmark interest rate steady at 6.50% after six straight hikes. Its decision not to change its benchmark interest rate was unexpected, to say the least. As a reminder, inflation remains a serious problem.

It is important to mention that the central bank hit a pause in spite of all challenges. One of the most serious problems is inflation. In the first month of the year, the country’s retail inflation rose to a three-month high of 6.52%. Retail inflation fell to 6.44% in February.

The Reserve Bank of India Governor Shaktikanta Das said in a televised statement that the central bank maintains “readiness to act should the situation so warrant.”

India and its Economy

Source: auto.economictimes.indiatimes.com

As stated earlier, the RBI decision was unexpected. Many economists expected the country’s central bank to increase its benchmark interest rate by 25 basis points (0.25%).

Moreover, economists also predicted that the central bank would subsequently hold the repo rate ─ the rate at which it lends money to commercial banks ─ steady for the rest of 2024.

However, the government-run State Bank of India said in a research report that it expected the central bank to pause in its April meeting.

The Reserve Bank of India started increasing the repo rate in May of 2022 after leaving the repo rate unchanged for two years at 4%.

In his statement, Shaktikanta Das maintained that the country’s gross domestic product (GDP) is expected to have expanded by 7% in the financial year that ended in March and projected growth of 6.5% for the ongoing fiscal year.

Reserve Bank of Australia and its Position

Source: forkast.news

Central bankers around the world have to deal with numerous challenges. For example, they are trying to balance concerns about worsening economic conditions with persistent inflation.

Apart from the Reserve Bank of India, other central banks are also trying to find a perfect balance. Nonetheless, it won’t be easy to cope with inflation.

On April 4, the Reserve Bank of Australia left its cash rate unchanged at 3.6% to break a run of 10 straight hikes. According to the country’s central bank, it needs more time in order to analyze the situation better.

As in the case of India, inflation is also a major issue in Australia.

The Reserve Bank of Australia has raised rates by a total of 350 basis points in order to cope with inflation. It is worth noting that inflation jumped to 7.8% in the final quarter of 2022. It fell to 6.8% in February. However, inflation remains way above the Reserve Bank of Australia’s target of 2-3%.