The
RBI has left interest rates and the cash reserve ratio for banks unchanged in its mid-quarter policy. However, there was a widespread expectation for a rate cut.
The central bank kept its policy repo rate unchanged at 8% and left the cash reserve ratio (CRR) for banks at 4.75%.
"Further reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate inflationary pressures," the RBI wrote in its mid-quarter policy review.
Here are the key highlights of RBI’s stance:
- Growth-inflation dynamics to influence future stance
- Easing core inflation shows demand conditions
- Rupee fall has offset crude oil price correction
- Economic activity in fy12 moderated sequentially
- Risk aversion, slowing forex flows to hurt significantly
- Pace of industrial expansion has slowed significantly
- M3 growth slightly under projected trajectory to continue using omos to contain liquidity pressure
- Credit growth above projected rate despite m3 slowdown
- Monsoon behaviour key to gauge inflation for rest of year
- Domestic macro situation raises deepening concerns
- Retail inflation on uptrend
- Cut in policy rates now could exacerbate inflation
- Data suggests economic recovery in us weakening
- Risk aversion, slowing capital flows to impact india
- More QE by advanced economies to adversely impact india
- Pace of industrial expansion has slowed significantly
- Real effective bank lending rate lower than 2003-08 levels
- Factors other than interest rates slowing down growth
- Gap between credit, deposit growth increasing liquidity pressures
- Liquidity management a priority
