HIGHLIGHTS - RBI holds rates, CRR unchanged
KARTHICK B
INTEREST RATES
--------------
REPO RATE: The central bank kept repo rate unchanged at 5.50 percent. This is the rate at which the central bank adds funds to the money market.
REVERSE REPO RATE: The central bank kept the reverse repo rate unchanged at 4.0 percent. This is the rate at which the central bank absorbs cash from the market.
CASH RESERVE RATIO (CRR): The RBI kept the CRR unchanged at 5.0 percent. The CRR is the percentage of banks' deposits which they must keep as cash with the central bank.
GDP GROWTH: The central bank lowered the 2008/09 forecast for growth to 7.0 percent with a downward bias from 7.5-8.0 percent.
Services sector activities are expected to further decelerate in the second half of 2008/09.
INFLATION: The central bank lowered its wholesale inflation projection to below 3 percent in annual terms by the end of March.
Consumer price inflation is yet to moderate and the decline in inflation expectations has not been commensurate with the sharp fall in wholesale price inflation, the central bank said.
The RBI said it would take into account behaviour of all price indices and their components to ensure price stability.
POLICY STANCE
-------------
For remainder of 2008/09
Provision of comfortable liquidity to meet the required credit growth consistent with the overall projection of economic growth.
- Respond swiftly and effectively with all possible measures as warranted by the evolving global and domestic situation impinging on growth and financial stability.
- Ensure a monetary and interest rate environment consistent with price stability, well-anchored inflation expectations and orderly conditions in financial markets.
B.Karthick
Research Analyst