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Home Opinion

US Inflation, Rupee Fall May Stop RBI Rate Cuts

8 months ago
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Will India’s New RBI Governor Cut Interest Rates ?
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Experts believe that sticky US inflation and a weaker rupee could lead to a limited RBI rate cut cycle. In January, US inflation rose to 3%, which was higher than expected. Tariffs and supply chain disruptions are keeping inflation elevated, which might impact the Reserve Bank of India’s (RBI) ability to cut rates and support economic growth.

 

The weaker rupee is also contributing to imported inflation, making the RBI more cautious about further rate cuts. The depreciation of the rupee adds to the cost of imports, thereby increasing overall inflation. This limits the central bank’s ability to ease monetary policy without exacerbating inflationary pressures.

 

In February, the RBI implemented its first rate cut in five years, signaling a shift towards accommodative monetary policy. However, experts warn that the scope for further rate cuts may be constrained due to the persistent high inflation in the US and the weakening rupee.

 

While the RBI aims to support economic recovery, balancing inflation control and growth support remains challenging. The central bank needs to carefully navigate these complexities to avoid potential negative consequences on the economy.

 

Overall, the combination of sticky US inflation and a weaker rupee presents a challenging environment for the RBI’s rate cut strategy.

Tags: Inflation

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