Reserve Bank Governor Raghuram Rajan on Tuesday held repo rate at 8 per cent as expected. The central bank has not cut rates since May 2013 despite retail inflation easing to a record low of 5.5 per cent in October.
The repo rate or the rate at which the RBI lends money to commercial remains unchanged at 8 per cent. The cash reserve ratio (CRR) stays unchanged at 4 per cent.
Most economists had expected Dr Rajan to hold rates despite pressure from Finance Minister Arun Jaitley, who had pushed for a cut in interest rates in a bid to lift demand and drive growth. The Indian economy is struggling to emerge from its slowest phase of economic growth since the 1980s.
The central bank, however, adopted a more dovish tone in response to the government's call for help to revive economic growth and said it may change its policy stance next year.
"A change in the monetary policy stance at the current juncture is premature. However, if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle," Dr Rajan said in a statement.
Stocks markets extended losses after the RBI's announcement, but they staged a recovery after economists highlighted the dovish rate outlook in RBI's commentary. The Sensex and Nifty traded flat as of 11.20 a.m.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
