RBI keeps interest rates unchanged

Reserve Bank Governor Raghuram Rajan today left all key rates unchanged citing increased risks to inflation and difficult external situation especially on the geopolitical front.
This is the fourth consecutive time that the RBI has kept key interest rates unchanged despite clamours from the industry to cut rates to boost economy.
The short-term lending rate (repo) rate now stands at 8 per cent, and the cash reserve requirement of banks at 4 per cent. The statutory liquidity ratio (SLR) has also been retained at 22 per cent.
Explaining the rationale for status quo policy, Rajan said though WPI inflation has ebbed to levels consistent with 8 per cent inflation by January 2015, "there are risks from food price shocks as the full effects of the monsoon's passage unfold, and from geo-political developments that could materialise rapidly."

He said that there are "uncertainties" over food inflation even though 6 per cent retail inflation target by January 2016 remains a possibility.
"The future policy stance will be influenced by the RBI's projections of inflation relative to the medium term objective of 6 percent by January 2016, while being contingent on incoming data," Rajan said.
The RBI also retained the growth projection for the current fiscal at 5.5 per cent. The apex bank sees FY16 growth at 6.3 per cent.
Stock markets remained flat with BSE Sensex at 26,626 points.