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Jun 18, 2012, 12.09 PM IST
The RBI left interest rates and the cash reserve ratio for banks unchanged on Monday, defying widespread expectations for a rate cut as it warned that doing so could worsen inflation.
The Reserve Bank of India kept its policy repo rate unchanged at 8% and left the cash reserve ratio 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. Economists polled by Reuters had forecast a rate cut, most likely of 25 basis points, while some government officials had also been calling for a rate cut. India's economic growth skidded to 5.3% in the March quarter, its weakest in nine years, but May headline inflation rose to 7.55%, according to data released last week. Also Read RBI does the unexpected, leaves repo, CRR unchanged RBI lets mkt down, Nifty at day's low, bond yields up 1.11% Why RBI feels cutting rates is not the right solution
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