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RBI keeps key repo rates unchanged citing inflation risks

India Blooms News Service | 30 Sep 2014, 06:13 pm
New Delhi, Sep 30 (IBNS): The Reserve Bank of India (RBI) on Tuesday decided to keep the key repo rate unchanged at 8 percent citing significant upside risk to its medium term inflation target.

The move was widely expected as RBI Governor Raghuram Rajan has vowed to bring consumer price inflation down to 8 percent by January 2015 and to 6 percent a year later.

Home and auto loan installments are unlikely to come down with the RBI deciding to keep interest rates on hold.

The central bank kept rates on hold since raising it by 25 basis points (0.25 percent) in January and the cash reserve ratio also stayed at 4 percent. The RBI also kept the statutory liquidity ratio unchanged.

According to the highlights of a presser issued by the RBI, Rajan said: “We need to reach 6 percent by 2016...We are reasonably set that we will reach 6 percent target, but a lot can happen over the next few months...The policy will be data-contingent.”

Rajan said that the situation is better than August but there are still risks in achieving the 6 percent target. “We are more confident of achieving the 8 percent target,” Rajan said.

The RBI Governor said that there is uncertainty about oil prices and even the rupee has been quite strong against a basket of currencies though it has weakened against the dollar.

“RBI, in its fourth bi-monthly monetary policy review, has come out with no rate change and delivered what market was expecting from the central bank," said Rohit Gadia of CapitalVia Global Research Limited.

RBI keeps key repo rates unchanged citing inflation risks

India Blooms News Service
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