The Reserve Bank of Indiai kept the key policy rates unchanged even as it retained the growth target for 2015-16 at 7.6 per cent.
The repo rate has been kept unchanged at 7.25 per cent, while the reverse repo stays at 6.25 per cent
The move was widely expected after a spike in food prices sent consumer inflation to an eight-month high.
What is repo rate?
Repo rate is the rate at which the central bank of a country (RBI in case of India) lends money to commercial banks in the event of any shortfall of funds.
What is reverse repo?
Reverse repo is the exact opposite of repo. In a reverse repotransaction, banks purchase government securities form RBI and lend money to the banking regulator, thus earning interest. Reverse reporate is the rate at which RBI borrows money from banks
The Reserve Bank of India (RBI) said government economic reforms and the timing of any increase in US interest rates would be key factors that will determine whether the central bank cuts rates for a fourth time this year.
“It is prudent to keep the policy rate unchanged at the current juncture while maintaining the accommodative stance of the monetary policy,” the RBI said in its statement.
“As the Reserve Bank awaits greater transmission of its front-loaded past actions, it will monitor developments for emerging room for accommodation.”
The central bank said that hardening of inflation, excluding food and fuel, is most worrisome.
The central bank has reduced the policy rate by a total 75 basis points since January, when it embarked on an easing cycle.
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