RBI May Lower Interest Rates in October, Says Crisil
The Reserve Bank of India (RBI) might start reducing interest rates around October if external factors like weather and international commodity prices remain stable, according to Crisil. The credit rating agency expects two rate cuts this fiscal year.
The RBI recently decided to keep the repo rate at 6.5% due to high food inflation. The decision was influenced by changing weather conditions and the need to monitor international commodity prices.
Governor Shaktikanta Das announced the Monetary Policy Committee’s (MPC) decision on August 8, emphasizing the RBI’s commitment to controlling inflation while supporting economic recovery. He anticipates a 7.2% GDP growth for the fiscal year 2024-25.
The report also noted that factors like international freight costs, geopolitical risks to crude oil prices, and hikes in domestic telecom tariffs could affect core inflation. The RBI aims to bring inflation down to its 4% target amidst ongoing economic uncertainties.
Lower interest rates can stimulate economic growth by making borrowing cheaper for businesses, which in turn can create more jobs.
Doubts Revealed
RBI -: RBI stands for Reserve Bank of India. It is the central bank of India, which means it manages the country’s money and financial system.
Interest Rates -: Interest rates are the cost of borrowing money. When you take a loan, you have to pay back the loan amount plus some extra money, which is the interest.
Crisil -: Crisil is a company that gives ratings to businesses and financial institutions. These ratings help people understand how safe or risky it is to invest in them.
Credit Rating Agency -: A credit rating agency is a company that evaluates how likely it is that a borrower will repay their debt. They give ratings that help investors decide where to put their money.
Repo Rate -: The repo rate is the rate at which the RBI lends money to commercial banks. If the repo rate is high, borrowing money becomes more expensive.
Food Inflation -: Food inflation means the prices of food items are increasing. When food prices go up, it costs more money to buy the same amount of food.
Shaktikanta Das -: Shaktikanta Das is the Governor of the Reserve Bank of India. He is responsible for making important decisions about India’s money and financial policies.
GDP Growth -: GDP stands for Gross Domestic Product. It is the total value of all goods and services produced in a country. GDP growth means the economy is getting bigger and producing more.
Fiscal Year -: A fiscal year is a 12-month period used for budgeting and financial reporting. In India, it starts on April 1 and ends on March 31 of the next year.