India keeps interest rates unchanged amid rising inflation risks and a slowing economy

India’s central bank kept benchmark interest rates unchanged at 6.50% on Friday as Asia’s third-largest economy struggles to contain rising inflation from damaging growth.

The decision came in line with economists’ expectations in a Reuters poll of consumer price inflation in India It rose to a 14-month high of 6.21% In October, it was significantly higher than the RBI’s target of 4% and above its tolerance limit of 6%.

The Reserve Bank of India has held interest rates steady since February last year, however, an expected slowdown in India’s economic growth has made the central bank’s task tougher.

During the July to September period, the Indian economy It grew by 5.4% from a year agoReuters-polled economists’ expectations of 6.5% were sorely missed and marked the slowest pace in nearly two years.

The slowdown has prompted concerns that the RBI’s restrictive policies could put the economy at risk of missing its forecast of 7.2% growth for the year to March 2025.

Both Finance Minister Nirmala Sitharaman And Commerce Minister Piyush Goyal He reportedly called for lower borrowing costs to boost credit demand and support the slowing economy.

“At a time when we want to grow industries and build capacities, bank interest rates should be more affordable,” the finance minister said. At an event held in Mumbai last month.

Central bank chief Shaktikanta Das, however, ruled out an immediate rate cut, although the central bank changed its policy stance. “Neutral” from A more restrictive “accommodation withdrawal” at the October meeting.

With the central bank’s second term ending later this month, Das had said an immediate interest rate cut could come in October. “very premature” And “too dangerous”And they are in no rush to join global central banks in easing.

The Indian rupee fell to a record low against the US dollar earlier this week, LSEG data showed, and any monetary easing measures could put further pressure on the currency and trigger capital outflows. The rupee last traded at 84.659 Against the greenback.

The benchmark is the Nifty 50 index GDP rose modestly after the release Last Friday and up 13.7% since the start of the year. For comparison, the MSCI Asia Ex Japan Index – It allocates about 23% of the funds to India – down from about 12% so far this year.

Indian bonds fell over the past few days with the benchmark 10-year yield falling to 6.677% on Thursday, its lowest level since February 2022, according to LSEG data. The 10-year yield rose 3.1 basis points to 6.711% after the RBI’s decision on Friday.

— CNBC’s Amala Balakrishnar contributed to this report.