India: Central Bank leaves rates unchanged whilst expressing concerns about faltering growth
December 16, 2011
At its policy meeting on 16 December, the Reserve Bank of India (RBI) left interest rates unchanged, with the repo rate thus remaining at 8.50%. The decision was widely expected by the market, as economic prospects are deteriorating and the Bank had hinted a halt to its tightening cycle in the previous meeting. The Bank stated that ?inflationary pressures are expected to abate in the coming months despite high crude oil prices and rupee depreciation. The growth deceleration is contributing to a decline in inflation momentum, which is also being helped by softening food inflation.? In fact, monetary authorities now seem confident about inflation moderating in the months ahead and are turning their attention to the economic deceleration, with the Bank expressly declaring that ?from this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth.?