Reserve Bank of India keeps rates unchanged

Nathan Andrada – Fourth Estate Cooperative Contributor

New Delhi, India (4E) – The Reserve Bank of India (RBI) kept interest rates steady for a fifth straight policy meeting, as the country with the fastest inflation among the BRIC emerging economies continue to deny its own government’s demand for monetary easing.

Despite keeping key interest rates unchanged, the central central hinted about easing rates in January, citing the improved inflation outlook has shifted monetary policy focus on boosting growth. The RBI is scheduled to release its third quarter policy review on Jan. 29.

Duvvuri Subbarao, India’s central bank governor, maintained the repurchase rate at 8 per cent, according to a statement released Tuesday in Mumbai. Subbarao has resisted calls from Palaniappan Chidambaram, India’s finance minister, to lower rates to spur economic growth, which has seen the slowest growth rate in a decade this current fiscal year.

In a statement by the RBI, India’s slowing economic growth and Prime Minister Manmohan Singh’s new reforms to put the economy back on the growth path could prompt the governor to take action against threats to the country’s gross domestic product.

The central bank cited global developments in politics and economics as the biggest hindrance to decisive policy action. Since its second quarter review in October, the RBI has observed improving global economy although it believes the situation is far from being stable.

The RBI also said overall wholesale price index (WPI) inflation in the last two months is safely below its target.

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