The Reserve Bank of India (RBI) on Tuesday kept the short-term indicative policy rate (repo rate) unchanged at 8 per cent, as the current economic environment is not conducive to cut rates.
The central bank also indicated that a change in the monetary policy stance is likely early next calendar year, “including outside the policy review cycle.”
“A change in the monetary policy stance at the current juncture is premature,” said RBI Governor Raghuram Rajan, addressing a press conference to announce the Fifth Bi-monthly Monetary Policy, here. “We don’t want to change the rate. When we change, we want to change it for good,” he added.
The central bank also kept the Cash Reserve Ratio (CRR) unchanged at 4 per cent.
The repo is the rate at which banks borrow funds from the central bank and CRR is the portion of total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. However, Dr. Rajan said that “if the current inflation momentum and changes in inflationary expectations continue and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle.”
Inflation likely to be around 6%
Reserve Bank of India Governor Raghuram Rajan on Tuesday said projections for the outlook for inflation in the medium-term at this stage would be contingent upon expectations of a normal South-West monsoon in 2015, international crude prices broadly around current levels and no change in administered prices in the fuel group, barring electricity.
Over the next 12-month period, according to him, inflation is expected to retain some momentum and hover around 6 per cent, except for seasonal movements, as the disinflation momentum works through. Accordingly, “the risks to the January 2016 target of 6 per cent appear evenly balanced under the current policy stance.” Some easing of monetary conditions has already taken place
