Reserve Bank Governor Raghuram Rajan held repo rate steady at 6.75 per cent on Tuesday, as widely expected, opting to wait until after the Budget is presented on February 29 to decide on whether to cut interest rates further.
"Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5 per cent by the end of 2016-17," the RBI said in a statement.
Dr Rajan was expected to keep the repo rate unchanged because of the rising trend seen in food inflation. The RBI wants annual inflation at 5 per cent by March 2017 but December was the fifth straight month when inflation ticked up.
"The Reserve Bank continues to be accommodative even as it leaves the policy rate unchanged in this review, while awaiting further data on the development of inflation," the RBI said.
There are fears that food prices could rise further because of delays to the sowing of the rabi (winter) crop this season.
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