RBI Keeps Repo Rates On Hold As Inflation Fears Mount

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    The Reserve Bank of India today (RBI) kept policy rates (repo rates) on hold citing inflation worries, pushing bond yields slightly higher. Repo rates are interest rates at which the RBI lends money to the country's banks and any decrease in these rates, tend to push rates lower. The repo rate was kept steady at 6 per cent.

    Inflation, as was largely expected played on the mind of the Monetary Policy Committe, which concluded its 2-day meet today. 

    RBI Keeps Repo Rates On Hold As Inflation Fears Mount
    "The Reserve Bank's survey of households showed inflation expectations firming up in the latest round for both three months ahead and one year ahead horizons. Farm and industrial raw material costs rose in October. Firms responding to the Reserve Bank's Industrial Outlook Survey expect to pass on the increase in input prices to their output prices," the RBI said in a release. 
     

    Clearly, the tone of the release from the RBI sounded more hawkish.

    Many analysts fear that the interest rate cut cycle is now over and from hereon there maybe an increase in interest rates.

    In fact, this could have been the last chance for the RBI to cut interest rates, though government and industry had hoped that the central bank would oblige.

    However, the Monetary Policy Committee, which decides on interest rates kept the policy on hold. The stock markets which were down all morning, fell further with the Sensex faling 235 points in trade.

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