The Reserve Bank of India (RBI) on December 6 stayed in line with the expectation of economists by keeping the key policy rates unchanged at 6.5 percent as inflation stayed above the central bank’s comfort zone and a slowdown in economic growth forced it to revise its forecast downward.

At the same time, the Monetary Policy Committee (MPC) lowered the cash reserve ratio (CRR) by 50 basis points (bps) to support economic activity, with the revision mapped out in two tranches of 25 bps each for December 14 and 28.

Consumer Price Index (CPI) inflation has been a significant concern for policymakers, hovering above the RBI’s comfort zone of 2-6 percent in recent months. The central bank is closely monitoring inflation dynamics, especially as global crude oil prices and geopolitical uncertainties add to the risks.

India’s GDP growth rate of 5.4 percent in Q2 FY2024 was the slowest in nearly two years, raising concerns over the economic momentum. With global demand waning and domestic consumption facing headwinds, the RBI’s liquidity-enhancing measures through the CRR cut are expected to provide some respite.

YESTERDAY NIGHT TOLD YOU FOR SAME MOVES