India's Central Bank Holds Key Rates

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Tuesday, the Reserve Bank of India left its interest rates unchanged, as expected. The central bank maintained its cash reserve ratio at 5%, repo rate at 4.75% and reverse repo at 3.25%. The bank rate is retained at 6%. In a statement, the central bank said the economy has begun to stabilize despite falling exports and poor monsoon. It kept its 2009/10 growth forecast at 6% with upside bias.

The central bank said performance of the industrial sector has improved markedly in recent months. Both domestic and external financing conditions are on the upturn. Capital inflows have revived. Activity in the primary capital market has picked up and funding from non-bank domestic sources has eased. Liquidity conditions have remained easy and interest rates have softened in the money and credit markets.

Moreover, the RBI raised its wholesale price inflation forecast to 6.5% with an upside bias at end-march 2010, up from 5% projected earlier.

Economists at ING Bank sees a rate hike from the RBI in the first quarter of 2010. Meanwhile, DBS Group Research expects the central bank to start hiking rates as early as January prompted by further rise in wholesale price inflation above 5% by December.

Tuesday, the Reserve Bank of India left its interest rates unchanged, as expected. The central bank maintained its cash reserve ratio at 5%, repo rate at 4.75% and reverse repo at 3.25%. The bank rate has been retained unchanged at 6%. (Market News Provided by RTTNews)