What did the RBI recently decide about interest rates?
The Reserve Bank of India (RBI) decided to keep interest rates unchanged, despite concerns about rising inflation.
Why is this decision significant?
The decision shows that the RBI is trying to balance two conflicting goals: controlling inflation and supporting economic growth.
What is inflation and why is it a concern?
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. High inflation can destabilize the economy.
What is the RBI's role in controlling inflation?
The RBI uses interest rates as a tool to control inflation. Raising interest rates usually helps to lower inflation.
Why didn't the RBI raise interest rates to combat inflation?
The RBI seems concerned that raising interest rates could slow down economic growth, which is already fragile.
What is the RBI's outlook on inflation?
The RBI has adjusted its inflation projections slightly upwards but hopes that factors like lower vegetable prices will help control inflation.
What are the risks if the RBI doesn't raise interest rates?
Not raising interest rates could lead to higher inflation. This can affect the value of the rupee and make imported goods more expensive, further fueling inflation.
What is the RBI's stance on economic growth?
The RBI is cautiously optimistic but acknowledges risks like weak exports and uneven rainfall affecting agriculture.
What is the "trade-off" the RBI is facing?
The trade-off is between controlling inflation by raising interest rates and supporting economic growth by keeping rates low. It's a tightrope walk because leaning too much on one side can have negative consequences on the other.
What tools does the RBI have besides interest rates?
The RBI mentioned it could use Open Market Operations to control excess money supply, which also impacts inflation
