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India's central bank holds rates
Source: Agencies |
September 18, 2012, Tuesday
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Print Edition
INDIA'S central bank left interest rates unchanged but cut the cash reserve ratio for banks yesterday, disappointing market hopes that it would follow up the government's unexpected spate of bold reform measures by reducing borrowing costs.
While the Reserve Bank of India praised New Delhi's long-stalled policy initiatives to bolster growth and shore up its creaking fiscal position, it said the primary focus of monetary policy remained fighting stubbornly high inflation.
The government, in turn, made clear it wants a rate cut at the bank's next monetary policy review in six weeks time, and said it was not yet finished with reforms.
"I am very confident that between now and October 30, since the government is expected to take a number of additional policy measures and also lay out the path of fiscal correction, the response of RBI on October 30 will be far more supportive of growth," Finance Minister P. Chidambaram told reporters.
The central bank held its policy repo rate at 8 percent, in line with expectations in a Reuters poll taken last Friday, hours before New Delhi said it would allow foreign direct investment in industries including supermarkets and airlines. Last Thursday, the government had announced a sharp increase in the price of heavily subsidized diesel.
Several economists said their expectations for when the RBI, which has two more policy reviews scheduled this year, might cut rates remained unchanged.
"The RBI is still focused on managing inflation. Future moves will be a function of how the government sorts out the fiscal mess," said Rajeev Malik, senior economist at CLSA in Singapore.
While the Reserve Bank of India praised New Delhi's long-stalled policy initiatives to bolster growth and shore up its creaking fiscal position, it said the primary focus of monetary policy remained fighting stubbornly high inflation.
The government, in turn, made clear it wants a rate cut at the bank's next monetary policy review in six weeks time, and said it was not yet finished with reforms.
"I am very confident that between now and October 30, since the government is expected to take a number of additional policy measures and also lay out the path of fiscal correction, the response of RBI on October 30 will be far more supportive of growth," Finance Minister P. Chidambaram told reporters.
The central bank held its policy repo rate at 8 percent, in line with expectations in a Reuters poll taken last Friday, hours before New Delhi said it would allow foreign direct investment in industries including supermarkets and airlines. Last Thursday, the government had announced a sharp increase in the price of heavily subsidized diesel.
Several economists said their expectations for when the RBI, which has two more policy reviews scheduled this year, might cut rates remained unchanged.
"The RBI is still focused on managing inflation. Future moves will be a function of how the government sorts out the fiscal mess," said Rajeev Malik, senior economist at CLSA in Singapore.
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