RBI Holds Interest Rates Steady in Monetary Policy Meet

The Reserve Bank of India today held interest rates steady in its policy meet largely in line with expectations. The repo rates (interest rates), which also mean the rates at which the RBI lends to banks was held steady at 8 per cent.

A Decline in the repo rates generally tends to lower interest rates on loans and fixed deposits. The RBI Continued to worry that inflation may rear its head once again, though WPI and CPI Inflation have fallen in the last few months.

The CRR was also held steady by the RBI.

"Retail inflation, as measured by the consumer price index (CPI), has decelerated sharply since the fourth bi-monthly statement of September. This reflects, to some extent, transitory factors such as favourable base effects and the usual softening of fruits and vegetable prices that occurs at this time of the year," the RBI has said in its policy.

The central bank was more worried about the durability of the inflation drop, which is one reason it kept interest rates on hold.

"The key uncertainty is the durability of this upturn. The full outcome of the north-east monsoon will determine the intensity of price pressures relating to cereals, oilseeds and pulses, but it is reasonable to expect some firming up of these prices in view of the monsoon's performance so far and the shortfall estimated for kharif production. Risks from imported inflation appear to be
retreating, given the softening of international commodity prices, especially crude, and reasonable stability in the foreign exchange market," the RBI said.

Stock markets saw a mild reaction in trade to the RBI decision. The Sensex was trading lower by 139 points.

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