Sucheta Dalal :Reserve Bank of India keeps key-rates unchanged
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal

 

MoneyLife
You are here: Home » What's New » Reserve Bank of India keeps key-rates unchanged
                       Previous           Next

Reserve Bank of India keeps key-rates unchanged  

July 28, 2009

 

Reserve Bank of India has kept all key rates like bank rate, repo rate, reverse repo rate and cash reserve ratio (CRR) unchanged and said it sees inflation to scale up to about 5% by March next year.
 
In its quarterly review of the monetary policy, the Reserve Bank while keeping the repo and reverse repo --shot-term rates at which banks lend and borrow from RBI -- retained economic growth projection at 6% with an upward bias in current fiscal.
 
The central bank while maintaining that there are progressive signs of economic recovery has warned that the overall scenario continued to be uncertain with fiscal consolidation posing a challenge.
 
It said there are some negative signs like delayed and deficient monsoon, food price inflation, rebound in global commodity prices, continuing weak external demand and high fiscal deficit.
 
In order to manage the government borrowing without crowding out present or potential private credit demand, the Reserve Bank said it will continue with its active liquidity management policy.
 
During the first half of 2009-10, planned open market operation (OMO) purchases and market stabilisation scheme (MSS) unwinding will add primary liquidity of Rs1.5 trillion, which by way of monetary impact is equivalent to reduction of CRR by over 3.5 percentage points, the RBI added.
 
Pointing out that the negative wholesale price inflation (WPI) numbers are only a statistical feature and do not have any structural significance, the central bank said within WPI inflation, inflation of primary articles, particularly food articles, remains significantly positive.
 
Even as inflation of manufactured products is negative, inflation of manufactured food products is close to double digits. Moreover consumer price indices (CPIs) have remained elevated, indeed also hardened in recent months, RBI added.
 
India's WPI based inflation rose to -1.17% for the week ended 11th July compared to -1.21% in the previous week as food articles like pulses, cereals, fruits and vegetables turned expensive. The wholesale price index during the corresponding week a year ago was as high as 12.13%.
 
The RBI in a way had followed the suit of most of the major central banks around the world which have by and large implemented the rate cuts and are expected to hold their decisions for few months, before going in for any revision. 
- Yogesh Sapkale [email protected]
 
HIGHLIGHTS
1 RBI projects economic growth of 6% with upward bias for current fiscal.
2 Inflation to firm up to 5% by March 2010
3 Bank rate at 6%, Repo rate at 4.75%, reverse repo rate at 3.25% and CRR at 5%
4 Challenge is to return to high growth of 9%, says RBI

 


-- Sucheta Dalal



 



Recent Comments