The Reserve Bank of India (RBI) unexpectedly kept the country's policy interest rate on hold on Wednesday, despite calling current inflation too high, citing the prospect of easing retail prices and its concerns about the weak domestic economy.
The RBI had been widely expected to raise the repo rate on Wednesday, after lifting the country's main lending rate by 25 basis points each at its previous reviews in September and October. It instead opted to keep the country's main lending rate at 7.75 percent.
Following are the highlights of RBI's mid-quarter review of monetary policy:
* RBI keeps key policy rate, cash reserve ratio unchanged
* Repo rate unchanged at 7.75 pc; cash reserve ratio unchanged at 4 pc
* RBI to wait for more data before taking policy action
* Outlook on global growth continues to remain moderate
* Volatility in the financial markets could pick up following the inevitable taper of the quantitative easing in the US
* Lacklustre indicators on services and subdued domestic consumption point at continuing headwinds to growth
* Expenditure cuts by Govt will only add to the pressures on the growth front
* Revival of stalled investments crucial for growth
* High inflation numbers risks entrenching inflation expectations at unacceptably elevated levels
* High and persistent inflation also increases the risks of exchange rate instability.
* RBI expects inflation to be contained on vegetable prices going down sharply
* Current inflation is high but its trajectory is uncertain and there is merit waiting for more data.
* RBI to be vigilant and will act between scheduled policies if expected softening in food prices does not materialise.