RBI holds key rates

RBI holds key rates, cuts growth forecast


The Reserve Bank of India left its short-term rates and banks' cash reserve requirements unchanged on 27th Jan. 2009 as it waited to gauge the impact of its aggressive easing since mid-October to stem a sharp economic downturn.
Fiscal measures to shore up the economy against the global downturn would sharply widen the federal government's fiscal deficit, the Reserve Bank of India said in its quarterly policy review.
It also cut its forecast for economic growth in the current fiscal year to 7.0 percent "with a downward bias" from an estimate of 7.5-8.0 percent in October, bringing it broadly in line with recent government and market predictions.
Wholesale price inflation was projected to fall below 3 percent in annual terms by the end of the fiscal year in March.
The central bank left its lending rate steady at 5.5 percent and its reverse repo rate , at which it absorbs surplus cash from the banking system, unchanged at 4.0 percent.
It has also kept the cash reserve ratio, the amount of funds banks have to keep on deposit with it, unchanged at 5.00 percent.