The Reserve Bank today decided to keep key interest rates unchanged but provided sufficient hints that it would reduce them in January, giving some comfort to industry and banks which have been clamouring for a rate cut for quite some time.

“In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to threats to growth from this point onwards,” RBI Governor D Subbarao said in the mid-quarter monetary policy review.

The RBI left the short-term lending (repo) rate and the cash reserve ratio —— the amount of deposits banks have to park with RBI—— unchanged at 8 per cent and 4.25 per cent, respectively.

RBI said that it is closely monitoring the evolving growth-inflation dynamics and it is likely to ease monetary policy in the January-March quarter.

The third quarter review will be unveiled on January 29.

Bankers felt that RBI would keep the promise and cut key interest rates next month giving them a leeway to pass on the benefits to retail consumers and corporates.

(This article was published on December 18, 2012)
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