India cenbank holds rates as expected; clues on stimulus exit eyed
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
MUMBAI - The Reserve Bank of India's monetary policy committee kept interest rates steady at record lows on Friday, as widely expected, but traders are awaiting comments about inflation and liquidity normalisation for further clues on the outlook.
RBI's key lending rate or the repo rate was held steady at 4% while the reverse repo rate or the borrowing rate also stayed unchanged at 3.35%.
All 60 economists polled by Reuters had said they expected no change in the repo or reverse rates, which have been steady since May last year.
After recent variable rate reverse repo auction cut-off yields were set at levels sharply above 3.35%, traders are expecting the reverse repo rate to be raised sooner rather than later and will await any clues on the timing from the governor's speech after the policy decision.
Market participants are keen to know if the central bank is considering advancing its exit from extraordinary liquidity support due to rising inflationary pressures, or if it continues to think those forces are transitory.
RBI has slashed the repo rate by a total of 115 basis points (bps) since March 2020 to soften the blow from the coronavirus pandemic and tough containment measures. This follows 135 bps worth of rate cuts since the beginning of 2019.
(Reporting by Swati Bhat; Editing by Kim Coghill)
