Monetary Policy Kept Unchanged in India

July 28, 2009

The Reserve Bank of India left its key repo and reverse repo rates at 4.75% and 3.25% and its cash reserve requirement at 5%.  The result matched expectations and was accompanied by a statement that placed an upward bias on the Bank’s growth forecasted and revised projected inflation in fiscal 2009-10 to 5% from 4%.  At the time of the last rate cut, a 25-bp reduction announced April 21, officials hinted that more relief would be forthcoming.  While promising to maintain an accommodative stance for now, they have begun to consider an exit strategy.  Prior to April, the repo rate had been reduced by 100 basis points each on October 20, 2008, December 6, and January 2nd and by 50 bps on November 3rd and March 4th.  The total sum of the cuts was 425 basis point points from a peak of 9.0%.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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