: Maintaining its stance on combating inflation, the Reserve Bank kept the interest rates unchanged in its monetary policy review on Tuesday. RBI kept the repo rate unchanged at 8 percent while the reverse repo rate stays at 7 percent.
RBI has hinted at lowering policy rate early next year if current trend in fiscal developments and disinflationary pressure continue. The central bank has also kept growth target for the current fiscal unchanged at 5.5 percent.
Change in monetary policy stance at the current juncture is premature,” RBI Governor Raghuram Rajan said. Inflation based on the Wholesale Price Index cooled to a 5-year low of 1.77 percent in October driven by softening prices of fuel and food items.
Poor showing by agriculture and manufacturing sector pulled down the country’s economic growth rate to 5.3 percent in the second quarter against 5.7 percent in the April-June quarter of this year.
Rajan has said that he will not hold rates for longer than needed. But analysts say that the central bank governor remains wary of factors outside his control, like volatile oil prices, even with the inflation rate running below the RBI`s target of 6 percent inflation by January 2016.
While holding the tiller steady, Rajan will have to strike a balance to avoid alienating senior government figures, as there is a discussion expected before the budget announcement in February to agree on a new monetary policy framework.
Bureau Report
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