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  • RBI keeps rate unchanged; inflation to guide future action

    Published on March 15, 2012

    New Delhi :  The Reserve Bank on Thursday kept key policy rate unchanged and said future policy action would be determined by the movement in inflation.

    “On the basis of the current macroeconomic assessment, it has been decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.5 percent,” RBI said in its mid-quarterly review.

    It has also kept the cash reserve ratio (CRR), the portion of deposits which banks are required to keep with the central bank, unchanged at 4.75 percent.

    “…notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions,” RBI said in its guidance for the future.

    Inflation rose to 6.95 percent in February which is much above the Reserve Bank’s comfort level of 5-6 percent.

    Last week, the RBI had reduced CRR by 0.75 percentage point to 4.75 percent to infuse Rs 48,000 crore into the system to mitigate pressure on account of payment of advance taxes.

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