India’s central bank kept its key rate unchanged and vowed to maintain its accommodative monetary policy stance.
The Reserve Bank of India governed by Raghuram Rajan on Tuesday decided to retain its repo rate at 7.50 percent and the reverse repo rate at 6.50 percent. The bank reduced its key rates by 25 basis points each in January and March.
The repo rate is the rate at which the central bank lends to commercial banks and the reverse repo rate is the rate at which the central bank accepts deposits from banks.
The cash reserve ratio was kept unchanged at 4.00 percent.
The bank observed that the transmission of policy rates to lending rates has not taken place so far despite weak credit off take and the front loading of two rate cuts.
With little transmission, and the possibility that incoming data will provide more clarity on the balance of risks on inflation, the Reserve Bank said it will maintain status quo in its monetary policy stance in this review.
The bank said output growth for 2015-16 is projected at 7.8 percent, compared to 7.5 percent in 2014-15, but with a downward bias to reflect the still subdued indicators of economic activity.
Going forward, RBI said it will maintain accommodative monetary policy stance, but monetary policy actions will be conditioned by incoming data.
CPI inflation is projected at its current levels in the first quarter of 2015-16, moderating thereafter to around 4 percent by August but firming up to reach 5.8 percent by the end of the year.
The material has been provided by InstaForex Company – www.instaforex.com