RBI leaves key rates unchanged; warns against high deficit

 

In its quarterly review of the monetary policy, the Reserve Bank while keeping the repo and reverse repo --shot-term rates at which banks lend and borrow from RBI-- retained economic growth projection at 6 per cent with an upward bias in current fiscal.


The policy, in line with the expectations of the bankers, however, said that there are progressive signs of recovery with increased food stocks, positive industrial production and optimistic business confidence.


However, it added, there are some negative signs like delayed and deficient monsoon, food price inflation, rebound in global commodity prices, continuing weak external demand and high fiscal deficit.


RBI expects inflation to scale up to around five per cent by March 2010.


Following are the highlights of the first quarterly review of RBI’s annual monetary policy


* Key short-term rates, ratios unchanged

* Repo rate at 4.75 pc, reverse repo 3.25 pc

* Bank rate at 6 pc, CRR 5 pc

* Growth pegged at 6 pc with upward bias for 2009-10

* WPI to be negative for a few more months

* Inflation seen at 5 pc by fiscal-end

* Enough liquidity in the system

* Fiscal deficit remain a challenge

* Large borrowings can crowd out private investment

* Need to push financial sector, governance reforms

* Money supply growth to remain at over 20 pc

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