Thursday, March 15, 2012

Reserve Bank of India Holds Repo Rate at 8.50%

The Reserve Bank of India [RBI] held its repo rate at 8.50% and reverse repo rate at 7.50%, Bank Rate at 9.50% and Cash Reserve Ratio (CRR) at 4.75%.  The RBI said: "Recent growth-inflation dynamics have prompted the Reserve Bank to indicate that no further tightening is required and that future actions will be towards lowering the rates. However, notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions."

The Reserve Bank of India previously cut the CRR by 75 basis points to 4.75%, and last increased the repo rate by 25 basis points at its October and September meetings, after hiking a surprise 50 basis points at its previous meeting to 8.00%, having increased 25 basis points in June, and 50 basis points during the May meeting.  India's key inflation measure, the wholesale price index, increased just 7.57% in December, compared to 9.11% in November, 9.36% in October, 9.72% in September, 9.78% in August, 9.22% in July, 9.44% in June, 9.06% in May, 8.66% in April, and 8.98% year on year in March.  

India reported annual GDP growth of 6.9% in the September quarter, down from 7.7% in the June quarter, and 7.8% in the March quarter this year, and 8.3% in the previous quarter.  The RBI revised its growth projections down for 2011-12 to 7.6 percent from 8.0 percent previously, due to downside risks.  The Indian Rupee (INR) has depreciated about 11% against the US dollar over the past year, while the USDINR exchange rate last traded around 50.22


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