The Reserve Bank of India (RBI) in its April-June quarter monetary policy on Tuesday left the key policy rate unchanged. However, it cut the statutory liquidity ratio (SLR) to 23% from 24% earlier. Now, the repo rate or the rate at which banks borrow from RBI remained at 8% while the reverse repo rate at which, the banks lend to RBI stood at 7%.
“Keeping in view the slowdown in growth, the Reserve Bank frontloaded the policy rate reduction in April with a cut of 50 basis points.
Subsequent developments suggested that even as growth moderated, inflation remained sticky. Keeping in view the heightening risks to inflation, the Reserve Bank decided to pause in the Mid-Quarter Review (MQR) of June 2012, even in the face of slowing growth,” D Subbarao, the governor of RBI said in the first quarter policy statement.
Meanwhile, the central bank raised the baseline projection of WPI based inflation to 7% for March, 2013 as against the earlier projection of 6.50%. This clearly suggests that RBI may not slash policy rates in a hurry unless the rate of inflation tapers down.
Source: Moneycontrol
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