India Refrains from Further Monetary Easing

The Reserve Bank of India (RBI) has opted to refrain from further monetary easing, after surprising markets with a mid-January rate cut.  The RBI on Tuesday kept its key repo rate at 7.75 percent, after lowering rates by a quarter-point three weeks ago.

The decision was widely expected on the basis of no new data on India’s inflationary environment since the last central bank meeting. Many analysts also expected the central bank to wait for the release of the budget due end of February to gauge the government’s commitment to fiscal consolidation and reforms.

Instead, the Reserve Bank of India cut the statutory liquidity ratio (SLR) – or the amount of bonds that lenders must set aside – by 50 basis points to 21.5 percent of deposits from the two-week cycle starting on Feb. 7 in a bid to spur banks to inject more credit into the economy.


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