RBI Holds Interest Rates Steady In Rajan's Last Monetary Policy

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The Reserve Bank of India (RBI) today kept interest rates steady in its Monetary Policy Review, as was largely expected, on worries over rising retail inflation.The repo rate was held steady at 6.50 per cent and so was the cash reserve ratio.

RBI Holds Interest Rates Steady In Rajan's Last Monetary Policy
This was also the last Monetary Policy of the current Reserve Bank of India governor, Raghuram Rajan.

Rajan's, 3-year term will come to an end on September 4. This was also the last bi-monthly monetary policy to be decided by the central bank Governor as the broad-based 6-member panel may take over the job before the next review on October 4.

In conjunction with naming its 3 members on the Monetary Policy Committee, the government is also likely to name the successor to Rajan. 

As far as the Monetary Policy is concerned the RBI largely kept interest rates steady, after retail inflation climbed to 5.77 per cent, the steepest rate in 22 months.

"Retail inflation measured by the headline consumer price index (CPI) rose to a 22-month high in June, with a sharp pick-up in momentum overwhelming favourable base effects. The rise was mainly driven by food, with vegetable inflation higher than the usual seasonal rise at this time of the year.

Sugar prices also firmed up due to a decline in domestic production after two successive years of drought. While pulses inflation started moderating, prices of pulses have been rising again since April after a short-lived correction in the previous quarter. Inflation pressures are also incipient in cereals.

These developments fed through into households' inflation expectations three months ahead, reversing the decline seen in the last two quarters," the RBI has said in a release.

Going ahead should retail inflation continue to trend higher, the RBI might continue to hold rates steady.


Read more about: rbi, monetary policy
Story first published: Tuesday, August 9, 2016, 11:01 [IST]
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