India Central Bank keeps borrowing costs unchanged

RBI says sustained hardening of inflation excluding food and fuel “most worrisome” [Xinhua]

The Central Bank of India has left its main interest rate unchanged at 7.25 per cent.

“It is prudent to keep the policy rate unchanged at the current juncture while maintaining the accommodative stance of monetary policy,” said a statement by Reserve Bank of India governor Raghuram Rajan on Tuesday.

Reverse repo rate stays at 6.25 per cent.

Rising food prices has sent consumer inflation to an eight-month high.

The Central Bank has maintained the output growth forecast for 2015/16 at 7.6 per cent.

Since January, the RBI has cut the repo rate thrice cumulatively by 75 basis points, with the last cut of 25 basis points being on June 2.

The Central Bank said on Tuesday, the sustained hardening of inflation excluding food and fuel was “most worrisome”.

“Moreover, the full effects of the service tax increase, which took effect from June, will feed through over the rest of the year. Some food prices, particularly of protein-rich items, pulses and oilseeds have risen sharply in recent months,” said the RBI statement.

“They will have to be carefully monitored as they tend to be sticky and impart an upward bias to inflation and inflation expectations. This assumes significance in view of households’ inflation expectations rising again,” the RBI statement said.

 

 

TBP and Agencies