RBI Maintains Status Quo

As widely expected, the RBI has maintained the repo rate and reverse repo rates unchanged in its mid-quarter monetary policy review. The following are the key points of the review:

1.    The apex bank kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.25 per cent of their net demand and time liabilities.
2.    It kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent.
3.    Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) and the Bank Rate at 9.0 per cent.

Outlook Provided

Headline inflation has been below the Reserve Bank’s projected levels over the past two months. The decline in core inflation has also been comforting. These emerging patterns reinforce the likelihood of steady moderation in inflation going into 2013-14, though inflation may edge higher over the next two months. In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards.