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RBI keeps key rates unchanged

Posted on Dec 19, 08:02AM | UNI

Reserve Bank of India (RBI) today kept the key rates unchanged but hinted easing of rates in January, saying with the decline in inflation, the focus of monetary policy would shift to removing impediments to growth.

Overlooking demands of the industry and bankers, the RBI left the short-term lending (repo) rate, Reverse Repo rate and the Cash Reserve Ratio (CRR) unchanged at 8 per cent, 7 per cent and 4.25 per cent respectively.

Announcing the Mid quarter review of monetary policy, Dr D Subbarao said inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards, RBI Governor D Subbarao said.

It is closely monitoring the evolving growth-inflation dynamics and would update projections for 2012-13 in the third quarter review.

It said the biggest risk to outlook stems from global politico-economic developments which could delay resolute policy action.

About inflation, Dr Subbarao said as WPI is showing some signs of moderation, retail inflation has continued to remain elevated. 'The non-food component of the index also suggested persistent inflationary pressure'.

The emerging patterns reinforce the likelihood of steady moderation in inflation going into 2013-14, though inflation may edge higher over the next two months.

The RBI said that since the Second Quarter Review in October, the global economy has shown some signs of stabilisation although the situation remains fragile.

"While several emerging and developing economies are gradually returning to higher growth, weak external demand and contagion risks from advanced economies render them vulnerable to further shocks,'RBI said.

On the domestic front, it said there are some incipient signs of pick-up though growth remains significantly below its recent trend.

The industrial output growth bounced back to 8.2pc in October, 2012,against a contraction of 5pc in the same month last year.

The Indian economy grew by 5.4 per cent in the first half (April-September) of the current fiscal, against 7.3 per cent in the corresponding period last year.

The RBI is slated to announce the third quarter policy review on January 29 next year.