Inflation and Trade Talks: The Deciding Factors

India’s monetary policy could soon enter a wait-and-watch mode, as highlighted by Nagesh Kumar, external member of the RBI’s Monetary Policy Committee (MPC). In an interview, Kumar said that the future course of RBI’s interest rate decisions will largely depend on inflation trends and the outcome of ongoing trade negotiations with the United States.

RBI’s Policy Pause Likely

The RBI has already slashed the repo rate by 100 basis points since February to support economic growth. However, Kumar pointed out that the central bank is now likely to pause further cuts and first assess the impact of its earlier measures. This cautious stance comes amid concerns over how trade policy uncertainties will unfold.

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Tariffs and Private Investment

Private investments have slowed down after the US announced 25% tariffs on Indian exports along with an additional 25% penal tariff on imports of Russian crude oil by India. Kumar emphasized that to reduce risks from such external shocks, India must diversify its export markets and deepen trade partnerships with other economies.

Market Insights

Analysts believe the RBI’s cautious approach could help maintain financial stability while allowing past rate cuts to transmit effectively. With inflation currently under control, the central bank still has some policy space, but the focus will remain on how global trade tensions impact growth momentum.

Market Update & Key Insights

• RBI repo rate cuts since February: 100 bps

• Next move: Pause and assess impact

• Key risks: Inflation volatility, US tariff measures

• Policy focus: Stimulating private investments and urban demand

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