The gear has shifted at Mumbai’s Mint Street from neutral to a mild pick-up. The Reserve Bank of India on Tuesday held its policy interest rates but loosened the hold on cash, signalling a bias towards growth after pursuing a tight money regime for 21 months.
RBI governor Duvvuri Subbarao left unchanged the repo rate and the reverse repo rate (the rates at which the central bank offers cash to commercial banks or sucks out excess liquidity) but injected Rs 32,000 crore by lowering the cash reserve ratio (CRR) — the share of deposits banks must park with RBI — by 0.5 percentage points to 5.5 %."Even as inflation remains elevated, despite moderation, downside risks to growth have increased," said Subbarao. "The growth-inflation balance of the monetary policy stance has now shifted to growth, while at the same time ensuring inflationary pressures remain contained."
RBI lowered growth projection for 2011-12 to 7% from 7.6% in view of global slowdown and domestic policy constraints and left its wholesale price index inflation target unchanged at 7% for 2011-12.
“Based on the current inflation trajectory, including consideration of suppressed inflation, it is premature to begin reducing policy rates,” said RBI. “The reduction in the policy rate will be conditioned by signs of sustainable moderation in inflation.”
{{/usCountry}}“Based on the current inflation trajectory, including consideration of suppressed inflation, it is premature to begin reducing policy rates,” said RBI. “The reduction in the policy rate will be conditioned by signs of sustainable moderation in inflation.”
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