MUMBAI: The Reserve Bank of India (RBI) kept its policy rate on hold at 6.75 percent on Tuesday, as widely expected, opting to wait until after the government’s annual budget statement at the end February to decide on whether to cut interest rates further.
Having cut the policy repo rate by 125 basis points in 2015, RBI Governor Raghuram Rajan warned on Friday against straying from the path of fiscal consolidation or relaxing the fight against inflation.
Rajan, in his statement on Tuesday, said the central bank would stay “accommodative” but would look forward to the government’s budget on Feb. 29, saying it needed to be one that supports growth and controls spending.
How the government implements a planned 24 percent pay hike in salaries and pensions for some 10 million current and former government employees will also be key in determining the path of inflation, he noted.
“The Reserve Bank continues to be accommodative even as it leaves the policy rate unchanged in this review, while awaiting further data on the development of inflation,” Rajan said in his statement.
“Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth.”
@Agency news.
