RBI Signals Potential Rate Cuts Amid Neutral Stance Shift

The Reserve Bank of India (RBI) retained its interest rate at 6.5% but shifted its policy stance to 'neutral,' hinting at possible future rate cuts. The RBI anticipates easing inflation, with a GDP forecast unchanged at 7.2% and inflation forecast at 4.5% for 2024-25.

The Reserve Bank of India (RBI) has decided to maintain its key interest rate at 6.5% while transitioning its policy stance from a hawkish approach to a 'neutral' one, foreshadowing potential rate cuts in the future. This move comes as the RBI focuses on stabilizing inflation while supporting economic growth.

In its 10th consecutive policy meeting, the monetary policy committee, composed of RBI officials and external members, voted predominantly to keep the repo rate unchanged. However, they unanimously agreed to shift the stance to 'neutral' amid signs of a slowing economy.

According to RBI Governor Shaktikanta Das, there is optimism about easing food inflation, while the core inflation appears to have leveled off. The unchanged GDP growth expectation of 7.2% and inflation forecast at 4.5% for 2024-25 underscore the RBI's confidence in economic stability. Nonetheless, the RBI remains vigilant about geopolitical risks and economic shocks, particularly concerning imports like crude oil.

(With inputs from agencies.)