Indian central bank keeps interest rates unchanged
The Reserve Bank of India kept its main lending rate at 8.0 percent.
MUMBAI: India s central bank kept its benchmark interest rate on hold Tuesday due to inflation concerns, despite calls from business for a cut in lending costs to boost the sharply slowing economy.
The Reserve Bank of India kept its main lending rate at 8.0 percent, and the percentage of deposits banks must keep with the central bank -- the so-called cash reserve ratio -- also unchanged. But the bank suggested that monetary policy could start easing in the next financial quarter, which starts in January.
"Although inflation pressures appear to be moderating, elevated food and commodity prices remain contingent risks," RBI governor Duvvuri Subbarao said in a statement.
Subbarao said that recent inflation patterns and projections reinforce the bank s guidance in October for a cut early in 2013. But the decision to keep rates on hold was likely to disappoint the government and business leaders, who have been calling for an immediate shot in the arm to the Indian economy, which grew at just 5.3 percent in the quarter to September.
The government on Monday cut its growth forecast for the current fiscal year to between 5.7 and 5.9 percent, putting Asia s third-largest economy on track for its worst annual performance in a decade. The once-booming Indian economy has slowed sharply due to high interest rates, Europe s debt crisis and sluggish investment caused by domestic and overseas concerns about policy-making and corruption.
China, South Korea and Brazil have all cut interest rates to shield their economies from the effects of the eurozone crisis. The RBI has kept rates on hold since April, when it cut them for the first time in three years.
