RBI may keep policy rates unchanged
July 31, 2012  09:43
The Reserve Bank has hinted at holding on to its elevated rates in the quarterly monetary policy review on Tuesday, saying there are increased risks on inflation scenario and lack of action on the fiscal front.

"Monetary policy space needs to be created through fiscal adjustment and structural measures to improve supply conditions," the Reserve Bank said in its report on Macroeconomic and Monetary Developments, released Monday on the eve of the policy announcement.

The near-term outlook on inflation is marked by a slew of upside risks despite significant slowdown in growth, the RBI said, adding that suppressed inflation, poor supply responses and a weaker monsoon are risks to price-situation.

"Persistence of inflation, even as growth is slowing has emerged as major challenge for monetary policy," it said.

For the month of June, the headline or WPI inflation stood at 7.25 percent while the consumer price index was at double-digit level of 10.02 percent.

The pro-growth lobby, which is alarmed over quarterly growth slipping to a nine-year low of 5.3 percent for the March quarter, wants the RBI to slash interest rate to prop-up growth.
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