Interest Rate Cut: Will India follow Fed rate cut? Ball is in RBI's court
The Bank of England has also reduced the interest rates. Now, due to the decision of the Fed Reserve, other central banks can also follow in this footsteps.
The US Central Bank Federal Reserve on Wednesday announced to reduce 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 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 indication of further reduction in interest rates by the Fed Reserve for two years has posed a new challenge in front of Governor Shaktikanta Das.
If the cycle of reduction in interest rates starts all over the world, then more and more capital will start coming in 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 reducing it by 50 basis points. Now interest rates in America have gone up from 4.75% to 5%. Other central banks can also take such decisions following its example. According to a report by Business Today, due to this, RBI Governor Shaktikanta Das is almost certain to face a lot of problems in the coming months. Currently, the RBI Repo Rate in India is 6.5%.
The European Central Bank has already reduced 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 the interest rates. Now, due to the decision of the Fed Reserve, other central banks can also follow in this footsteps. RBI may also have to make changes in its monetary policy.
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.