New Delhi: As expected, the Reserve Bank of India on Tuesday kept key rates unchanged on Tuesday, staying focused on containing inflation, while adopting a more dovish tone in response to the government's call for help to revive economic growth.
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 remained unchanged at 8%, the reverse repo rate at 7% and the credit reserve ratio at 4%.
The central bank hinted at lowering the policy rate early next year if the current trend in fiscal developments and disinflationary pressure continue.
On the inflation trajectory, Rajan said he expects it to ease further and average at the 6%.
"Over the next 12-month period, inflation is expected to retain some momentum and hover around 6 per cent, except for seasonal movements, as the disinflation momentum works through," he said in the bi-monthly review of the monetary policy.
Driven largely by a base-effect, the consumer price inflation for October had come in at 5.52 per cent, the fifth consecutive month that it had fallen down.
Under its glide path, the RBI is targeting to get the CPI inflation at 8 per cent as of January 2015 and take it down to 6 per cent by January 2016. While the 2015 target is achievable, Rajan had in the last policy sounded concerned about the "upside risks" to the 2016 target.
Central forecast for retail inflation is revised downward to 6 per cent from 8 per cent for March 2015.
Calls for a rate cut had been growing in the run up to the policy announcement, with Finance Minister Arun Jaitley also pitching for lower the cost of capital to boost growth.
(With Agency inputs)
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