Mumbai: The Reserve Bank of India (RBI) has kept key policy rate and cash reserve ratio unchanged in the December 2013 Mid-Quarter Monetary Policy Review. On the basis of an assessment of the current and evolving macroeconomic situation, the RBI decided to keep the policy repo rate under the liquidity adjustment facility (LAF)out unchanged at 7.75 per cent and did not touch the cash reserve ratio (CRR) of scheduled banks which remains 4.0 per cent of net demand and time liability (NDTL).
Consequently, the reverse repo rate under the LAF will remain unchanged at 6.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.75 per cent.
In its assessment the apex bank said that outlook for global growth continues to remain moderate, with an uneven recovery across industrial countries while pointing out that activity in major emerging market economies barring China has decelerated on account of weak domestic demand even though there has been some improvement in export performance.
RBI Governor Raghuram Rajan said the apex bank will wait for more data before taking policy action. He said that there has been a significant fall in vegetable prices at both wholesale and retail level. While admitting that current inflation is still too high, Rajan said RBI will wait for more data before acting.
"If expected softening of food inflation does not materalise, RBI will act, including on off-policy dates. We are trying to calibrate monetary policy to primarily target inflation in an environment of weak economy. Our sense is economic growth is below potential even now. Growth in second half of current fiscal is expected to be stronger on expansion in agriculture and exports and stalled projects coming on stream. The RBI will not react to any spike in inflation that is temporary in nature," he said.
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