The Central Bank of India reduced the rate for the first time in five years
Economy
The Reserve Bank of India (RBI) has lowered its key interest rate for the first time since 2020 to support slowing economic growth. The decision to reduce the REPO rate by 25 basis points to 6.25% was made unanimously against the backdrop of weakening inflation and slow industrial production rates.
The Indian government forecasts economic growth of 6.4% in the current fiscal year, which is lower than the initial range, and growth is expected to be within 6.3%-6.8% next year. The Central Bank estimates it at 6.7%. RBI manager Sanjay Malhotra noted that growth could be driven by improved employment, reduced taxes, and stable yields.
While inflation remains above the target of 4%, it decreased to 5.22% in December and is projected to continue to decline. However, uncertainty regarding energy prices remains a risk.
Financial markets responded to the decision by increasing the yield of 10-year bonds to 6.69%, strengthening the ruble to 87.38, and a 0.2% increase in stock indices.
While inflation remains above the target of 4%, it decreased to 5.22% in December and is projected to continue to decline. However, uncertainty regarding energy prices remains a risk.
Financial markets responded to the decision by increasing the yield of 10-year bonds to 6.69%, strengthening the ruble to 87.38, and a 0.2% increase in stock indices.
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