No Surprise in RBI Policy as Raghuram Rajan Holds Repo Rate Steady

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Reserve Bank Governor Raghuram Rajan held repo rate steady at 6.75 per cent in his monetary policy announcement on Tuesday. The status quo on repo rate comes amid a pick-up in economic growth, the recent uptick in retail inflation and the prospects of a rate hike in the US.

RBI’s monetary policy was along expected lines, none of the 45 respondents polled by Reuters expected Dr Rajan to cut repo rate today.

The cash reserve ratio, which is the amount of deposits lenders need to keep with RBI, remains unchanged at 4 per cent. The statuary liquidity ratio, or the percentage of deposits that lenders have to maintain in the form of gold or government bonds, was also retained at 21.5 per cent.

Dr Rajan had cut repo rate by a higher-than-expected 50 basis points at the last policy review in September. In all, the central bank has cut by 125 basis points this year in a bid to spur economic growth.

Monday’s GDP data, which showed growth picking up from 7 per cent in Q1 to 7.4 per cent in Q2, indicates that the rate cuts have started pushing growth, analysts say.

However, consumer inflation crept back to a four-month high of 5 per cent in October, which likely weighed on RBI’s decision, analysts said.