RBI holds interest rates steady in monetary policy

Updated: Tuesday, September 30, 2014, 11:14 [IST]

As was widely expected the Reserve Bank of India (RBI) today kept (repo rates) interest rates steady at its Monetary Policy Review held today in a move aimed at conquering stubborn inflation in the economy.

The cash reserve ratio or CRR has also been left unchanged in the policy.

The country's central bank has projected FY 2016 growth rate at 6.3 per cent, while also announcing a cut in ceiling on HTM for bonds.

Going ahead analysts say that there may be a case for the RBI to cut rates if inflation remains low.

"The most heartening feature has been the steady decline in inflation excluding food and fuel, by a cumulative 111 basis points since January 2014, to a new low. With international crude prices softening and relative stability in the foreign exchange market, some upside risks to inflation are receding. Yet, there are risks from food price shocks as the full effects of the monsoon's passage unfold, and from geo-political developments that could materialise rapidly," the RBI said in its policy statement.

RBI Governor Raghuram Rajan has hinted on several occasions that the RBI was determined to battle inflation, a move that also has the backing of the government.

Analysts are optimistic that the governor would reduce interest rates in the future. "I have no desire to keep interest rates high for even a second longer. I want to bring down interest rates when its feasible. It will be feasible when we would have won the fight against inflation," he had said at a banking event earlier this month.

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