RBI leaves key rates unchanged
2012-06-18 12:05:58
The Reserve Bank of India decided to leave its key interest rates unchanged saying that another rate cut could exacerbate inflationary pressures.
The central bank on Monday kept the repo rate at 8.00 percent. The repo rate is the rate at which the central bank lends to banks.
The reverse repo, the rate at which the central bank borrows from banks, was retained at 7.00 percent. Meanwhile, the cash reserve ratio, or CRR, was left unchanged at 4.75 percent.
Majority of economists had expected the central bank to leave policy unchanged, while some were looking for a reduction in the repo rate or the CRR.
The RBI said further reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate inflationary pressures. "Future actions will depend on a continuing assessment of external and domestic developments that contribute to lowering inflation risks," it said.
According to RBI, the persistence of overall inflation both at the wholesale and retail levels, amid slow economic growth, points to serious supply bottlenecks and sticky inflation expectations.
The central bank raised the limit of export credit refinance to 50 percent of outstanding export credit of banks from 15 percent, which will potentially release additionally liquidity.