RBI leaves repo rate, CRR unchanged
Mon, 18 Jun 2012 00:07:12 -0600
There were widespread expectations in the market for a rate cut
Much to the consternation of the market, the Reserve Bank of India left policy rates and the cash reserve ratio untouched in its mid-quarter policy review on Monday.
There were widespread expectations in the market for a rate cut. But inflationary concerns appeared to have weighed heavy in the policy review. As of now, the repo rate stands unchanged at 8 per cent, while cash reserve ratio stands at 4.75 per cent.
"Further reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate inflationary pressures," the central bank said.
RBI had cut policy rate by 50 basis points in April, signalling a reversal in its rate-hiking spree. Deteriorating global and domestic economic conditions created expectations for a cut in both interest rates and the cash reserve ratio.
The economic growth rate has taken a hit because of the tight money policy and March quarter economic growth slowed doen to 5.3 per cent. The data sparked calls from industry for immediate action to lift an economy that Standard & Poor's says could be the first BRIC nation to lose its investment-level credit rating.
April industrial output figures last week suggested little pickup in economic growth heading into the current quarter.
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