RBI leaves the Repo, CRR unchanged
As expected , The Reserve Bank of India (RBI), in its Mid quarter Monetary Policy Review has kept the Repo rate unchanged at 8%. But despite comments from leading bankers, it has also kept Cash Reserve Ratio (CRR) unchanged at 4.75%. However, the Central Bank has agreed to continue with open market operations. This time RBI has given more weight towards rising inflation rather than week growth momentum.
Guidance
The evolving growth-inflation dynamic will continue to influence the Reserve Bank's stance on interest rates. Core inflation has moderated, reflecting demand conditions and lower pricing power. However, both headline and retail inflation rates are rising, which have a bearing on inflation expectations. Future actions will depend on a continuing assessment of external and domestic developments that contribute to lowering inflation risks.
Management of liquidity remains a priority. Even as the liquidity situation converges to the comfort zone, the Reserve Bank will continue to use OMOs as and when warranted to contain liquidity pressures.
Finally, recognizing that the global situation is turbulent, the Reserve Bank stands ready to use all available instruments and measures to respond rapidly and appropriately to any adverse developments.
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