RBI keeps key rates unchanged

02 Feb '16

2 min read

The Reserve Bank of India (RBI) has kept key rates unchanged at its bi-monthly review of the monetary policy,

On the basis of an assessment of the current and evolving macroeconomic situation, the RBI decided to keep the repo rate under unchanged at 6.75 per cent and the cash reserve ratio (CRR) of scheduled banks at 4 per cent.

The reverse repo rate will also remain unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 7.75 per cent.

RBI Governor Raghuram Rajan said the central bank would stay "accommodative" but would look forward to the government's Budget on February 29, saying it needed to be one that supports growth and controls spending.

How the government implements the Central Pay Commission award in salaries and pensions will also be key in determining the path of inflation, he noted.

"The Reserve Bank continues to be accommodative even as it leaves the policy rate unchanged in this review, while awaiting further data on the development of inflation," Rajan said in his statement.

"Structural reforms in the forthcoming union budget that boost growth while controlling spending will create more space for monetary policy to support growth."

If the fiscal deficit is kept within reason, then inflation trends over coming months could eventually lead to lower interest rates.

Oil prices near 13 year lows and subdued food prices should help bring inflation down to the RBI's target of 5 per cent by March 2017, after it hit a 15-month high of 5.61 per cent in December. (SH)

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