Coal news and updates

RBI leaves interest rates unchanged

December 18: RBI Governor Raghuram Rajan surprised the markets by leaving all key policy rates unchanged, notwithstanding persistent high inflationary pressure.

The short-term lending rate was kept unchanged at 7.75%, while the cash reserve ratio (CRR) remained at 4%, the Reserve Bank of India said in its mid-quarter monetary policy review.

The decision to keep rates unchanged will be a big breather for the industry and retail borrowers in particular as the markets had expected another 25 bps hike in the short-term lending rate.

The Reserve Bank said it will take “calibrated action” in the future, based on inflationary trends and action by the US Federal Reserve.

The status quo decision came as a surprise as only last week the RBI had pulled up banks for not helping it in monetary policy transmission.

Rajan said continuing weakness in growth was the main driver of his policy action.

Analysts are of the opinion that inflation has peaked and will ease from December as food prices cool on better supplies with winter crops coming in.

Rajan, however, sounded cautious when he said, “The policy decision is a close one. The current inflation is too high. However, given the wide bands of uncertainty surrounding the short-term path of inflation from its high current levels, and given the weak state of the economy...there is merit in waiting for more data to reduce uncertainty.”