The US Central Bank Federal Reserve on Wednesday announced a reduction in interest rates by 50 basis points. With this, the hope of reduction in interest rates in India has also increased. Now the ball is in the court of the Reserve Bank of India (RBI). It was believed that RBI Governor Shaktikanta Das is also waiting for the decision of the Fed Reserve before reducing the interest rates. However, the Fed Reserve’s indication of further reduction in interest rates for two years has posed a new challenge in front of Governor Shaktikanta Das.
More capital will start flowing into emerging markets like India
If the cycle of interest rate cuts starts all over the world, then more and more capital will start coming into emerging markets like India. Due to this, RBI will face currency management challenges. It was believed that the Fed Reserve could cut interest rates by 25 basis points. But, it has surprised everyone by cutting it by 50 basis points. Now interest rates in America have gone up from 4.75 percent to 5 percent. Other central banks can also take such decisions following its example. According to a Business Today report, due to this, RBI Governor Shaktikanta Das is almost certain to have a tough time in the coming months. Currently, the RBI repo rate in India is 6.5 percent.
RBI may have to make changes in monetary policy
The European Central Bank has already cut its interest rates twice this year. The Bank of Canada also recently reduced the interest rate by 25 basis points. There is a possibility of further reduction in it. The Bank of England has also reduced interest rates. Now with the decision of the Fed Reserve, other central banks can also follow this footstep. RBI may also have to make changes in its monetary policy.
Inflation rate and rupee will have to be kept under control
The Fed Reserve has indicated another rate cut by the end of this year. It is also being estimated that interest rates will keep falling there till 2026. This can become a big concern for Shaktikanta Das. This can cause problems for RBI in controlling inflation. RBI has set a target of 4 percent for inflation rate. It will also have to keep an eye on global investors coming to India in search of high returns. However, this will have a positive effect on the stock market and debt market. Also, the increase in the value of rupee against the dollar can also affect exports.
Read this also
Interest Rates: Interest rates decreased in America, historic decision taken after 4 years, what will RBI do now
