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RBI Governor Rajan does not blink, keeps key rates constant

While keeping the short term lending (repo) rate unchanged at 8 per cent, RBI Governor Raghuram Rajan said that “a change in the monetary policy stance at the current juncture is premature”.

“However, if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle,” he said.

While industry reacted with disappointment saying the RBI has not been accommodating, while the government, which has also been pitching for a rate cut, said it looked forward to the central bank supporting the revival of growth and employment. The repo rate continues to be at 8 per cent while the cash reserve ratio has also been retained at 4 per cent. Following the policy announcement, most of the bankers said that there will be no change in lending and deposit rates for now. Rajan, however, said that the industry was being myopic and asserted that the central bank is for the “strongest possible growth”.

“I think there is a misconception in corporate India that the central bank is not concerned about growth,” Rajan said. Asserting that RBI is not against growth, a combative Rajan said, “How do you bring these two together? By bringing inflation down. Otherwise, we are going to have this high inflation and low growth scenario again and again.”
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