RBI credit policy: RBI keeps repo rate steady on inflation concerns

The Reserve Bank of India (RBI) left interest rates unchanged as expected on Thursday, underscoring its concern about inflation after the sudden spike in global oil prices even as economic growth has turned sluggish.

The RBI kept its policy repo rate unchanged at 8.5% at its mid-quarter review, in line with forecasts.

Data released Wednesday showed February wholesale price index inflation at 6.95%, slightly lower than the RBI's March-end projection of 7%.

Following are highlights from the monetary policy statement:

POLICY MEASURES:

* Repo rate retained at 8.5%.

* Reverse repo rate unchanged at 7.5%.

* Cash reserve ratio unchanged at 4.75%.

POLICY STANCE:

* Notwithstanding deceleration in growth, inflation risks remain, which will influence timing, magnitude of rate actions.

* Future actions will be towards lowering rates.

INFLATION, GROWTH

* Economic performance in Q4 of 2011-12 expected to be better than Q3.

* Upside risks to inflation have increased from recent surge in oil prices, fiscal slippage, rupee fall.

* Significant suppressed inflation in fuel, fertilizer, power continues to be there.

* Consumer price index inflation for January suggests price pressures persist at retail level.

* Sudden spike in global crude prices have accentuated risks to inflation and growth.

* Momentum indicator of non-food manufactured products inflation showed moderating trend in February.