RBI MPC Meet Live: Global interest rate scenario more favourable for RBI
In the months of August and September, the Indian banking system experienced a substantial daily average surplus liquidity, with figures reaching Rs 1.5 lakh crore and Rs 1.29 lakh crore, respectively. These calculations exclude seven days in September when the system faced a deficit. The month of July also witnessed a significant average surplus of Rs 1.34 lakh crore, as revealed by an examination of data from the central bank.
The global interest rate environment has recently become more conducive for the Reserve Bank of India (RBI), following a 50 basis point rate reduction by the US Federal Reserve last month. This move was accompanied by similar rate cuts implemented by the Bank of England and the European Central Bank in recent months.
Although the RBI has emphasized that its decisions are primarily influenced by domestic inflation factors, the rate cuts in advanced economies have resulted in a broader interest rate differential between India and these nations. “A wider interest rate differential plays an important role in the rupee exchange rate, with a shrinking gap typically leading to weakness in the local currency.”
