RBI keeps interest rates steady, hikes GDP outlook
Investing.com-- The Reserve Bank of India kept interest rates unchanged as expected on Friday, but slightly hiked its annual growth forecast for the Indian economy amid persistent strength in consumption.
The RBI kept its policy repo rate at 6.5% for a seventh consecutive meeting, after signaling an end to its rate hike cycle in 2023.
But the bank has given little indication that it plans to begin loosening policy anytime soon, with RBI Governor Shaktikanta Das stating that the bank will continue to withdraw policy support until consumer price index is brought down sustainably to 4%.
CPI inflation fell sharply over the past year, but has faced some resistance this year in reaching the RBI’s 4% target.
Das maintained the RBI’s annual CPI inflation outlook between a range of 4% to 4.5%.
Food prices remained the biggest sticking point for overall inflation.
The RBI Governor said that even if the U.S. Federal Reserve and other major central banks were planning to loosen policy this year, the RBI had no immediate plans to follow suit.
RBI hikes 2025 GDP outlook
But despite high rates and sticky inflation, the RBI slightly raised its annual gross domestic product forecast for the current fiscal year, citing robust consumer spending and urban consumption.
Real GDP growth for current fiscal year is now projected at 7.2%, compared to a prior forecast of 7%.
The outlook presented a fourth consecutive year of above 7% GDP for the Indian economy, as it benefited from a post-COVID boom. The country became the fastest-growing major economy over the past three years.
Still, some doubts over the Indian economy crept into Indian markets this week, after the BJP-led NDA alliance won a much smaller majority than expected in the 2024 general elections.
This raised some doubts over whether Prime Minister Narendra Modi could continue rolling out sweeping economic reforms with little opposition.
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RBI keeps interest rates steady, hikes GDP outlook