In its half-yearly review of the monetary policy, the Reserve Bank of India has maintained a status quo on the key rates in light of the various monetary easing measures already announced in the past few weeks. Though the central bank has expressed concerns over the slowing economic growth and emphasised the need to maintain financial stability, but the double-digit inflation remains a “critical policy concern” for the RBI.
Policy highlights:
- The repo rate and reverse repo rate have been left unchanged at 8% and 6% respectively.
- The cash reserve ratio (CRR; the ratio of the cash balance to be maintained by banks with the central bank) and the statutory liquidity ratio have been left unchanged at 6.5% and 25% respectively.
- The bank rate (the rate at which the RBI lends to commercial banks) too has been left unchanged at 6%.
- The gross domestic product (GDP) growth forecast for FY2009 has been revised downwards from around 8% to 7.5-8.0%.
- Inflation target of around 7% by March 2009 while maintaining a medium-term objective of a 3% rate. In line with this, the RBI has maintained its growth targets for money supply, credit and deposit at 17%, 20% and 17.5% respectively.
- The RBI aims at maintaining an optimal balance between its objectives of achieving financial stability, price stability and well-anchored inflation expectations, and growth.
Concerns expressed by RBI:
- Increasing and intolerable inflation
- Slowdown in economic growth
- Liquidity & financial stability
