Status quo on, RBI points to a Jan rate cut


Acknowledging the recent moderation in inflation, a cautious Reserve Bank of India (RBI) on Tuesday maintained status quo on key policy rates, but clearly indicated it will cut rates in January. "Monetary policy has to increasingly shift focus and respond to the threats to growth", the RBI said, in its mid-quarter review of the monetary policy.

A day after the finance ministry urged the central bank to consider a "more accommodative monetary policy", the RBI refused to play the ball and retained the cash reserve ratio (CRR) — portion of deposits to be kept with the RBI — unchanged at 4.25 per cent and the policy repo rate — the rate at which the banks borrow from the RBI —under the liquidity adjustment facility at 8.0 per cent in its mid-quarter review of the monetary policy.

The RBI said headline inflation has been below the RBI's projected levels over the past two months. "The decline in core inflation has also been comforting. These emerging patterns reinforce the likelihood of steady moderation in inflation going into 2013-14, though inflation may edge higher over the next two months," it said.

GDP growth is evolving along the baseline projection of 5.8 per cent for 2012-13 set out in the October review, it said. However, it indicated that the monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards in the wake of ebbing inflation pressures. Liquidity conditions will be managed with a view to supporting growth, thereby preparing the ground for further shifting the policy stance to support growth, the RBI said.

Responding to the RBI policy, chief economic adviser to the finance ministry Raghuram Rajan said, "I think it's good that the RBI sees that there is room to ease... I look forward to good news in policy (January). But they (RBI) also have some incentive to seek growth in the country."

... contd.

Please read our terms of use before posting comments
TERMS OF USE: The views expressed in comments published on are those of the comment writer's alone. They do not represent the views or opinions of The Indian Express Group or its staff. Comments are automatically posted live; however, reserves the right to take it down at any time. We also reserve the right not to publish comments that are abusive, obscene, inflammatory, derogatory or defamatory.