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India Central Bank keeps rates steady
December 18, 2013, 6:35 am

The industry and retail borrowers are likely to cheer the decision as the markets had expected another 25 bps hike in the short-term lending rate [Xinhua]

The industry and retail borrowers are likely to cheer the decision as the markets had expected another 25 bps hike in the short-term lending rate [Xinhua]

The Indian Central Bank Governor Raghuram Rajan on Wednesday announced a bold decision of leaving all key policy rates unchanged.

The short-term lending rate was kept unchanged at 7.75 per cent, while the cash reserve ratio (CRR) remained at 4 per cent, the Reserve Bank of India said in its mid-quarter monetary policy review on Wednesday.

The RBI had been widely expected to hike the rates amid persistent high inflationary pressure. 39 out of 43 economists predicted the RBI would hike its repo rate to 8.00 per cent, claimed a Reuters poll earlier.

The industry and retail borrowers are likely to cheer the decision as the markets had expected another 25 bps hike in the short-term lending rate. The Reserve Bank said it will take “calibrated action” in the future, based on inflationary trends and action by the US Federal Reserve.

“There are obvious risks to waiting for more data, including the possibility that tapering of quantitative easing by the U.S. Fed may disrupt external markets and that the Reserve Bank may be perceived to be soft on inflation. The Reserve Bank will be vigilant,” a RBI statement said.

The Indian government has been battling low growth and a rising inflation this year even as it prepares for general elections slated for May 2014.

Indian Finance Minister Palaniappan Chidambaram has pledged to limit the fiscal deficit to 4.8 per cent of gross domestic product in the fiscal year ending March 2014.

 

TBP and Agencies

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