<p> RBI Governor Duvvuri Subbarao today defended the bank's decision to keep the key policy rate unchanged saying inflation could rise to above 8 per cent in the near-term.<br /><br />He said the move to marginally slash the cash reserve ratio was aimed at making available liquidity for productive lending. Subbarao was speaking to reporters at the customary post-policy meeting after unveiling the second quarter review of Monetary Policy for 2012-13.<br /><br />The RBI Governor, who suggested a reasonable likelihood of further policy easing in the fourth quarter of this fiscal year, was evasive on whether he will slash the policy rates in January.<br /><br />Subbarao said he may take some action in the next policy review. The third quarter review of monetary policy is scheduled for January 29, 2013.</p>.<p><br />"If we see that inflation is likely to be coming down even in the January-March quarter, we may take some action in January. But I cannot say anything beyond that," Subbarao said, adding "at its peak, inflation will go up to beyond 8 per cent".<br /><br />"Looking at the current balance between growth and inflation risks, we thought it is appropriate to maintain the policy rate where it is, (which is) just a little bit above the inflation rate; also considering that inflation is going to go up in the next few months," he said.<br /><br />Subbarao, who chose to focus on inflation worries over boosting the steeply fallen growth rate in the policy by cutting the policy rates, described his choice as a "complex challenge" and cited high fiscal and current account deficits as inhibiting factors for an easy money policy.<br /><br />"We have had to restrain demand, even while ensuring flow of credit to productive sectors so as supply constraints are eased," Subbarao said.</p>
<p> RBI Governor Duvvuri Subbarao today defended the bank's decision to keep the key policy rate unchanged saying inflation could rise to above 8 per cent in the near-term.<br /><br />He said the move to marginally slash the cash reserve ratio was aimed at making available liquidity for productive lending. Subbarao was speaking to reporters at the customary post-policy meeting after unveiling the second quarter review of Monetary Policy for 2012-13.<br /><br />The RBI Governor, who suggested a reasonable likelihood of further policy easing in the fourth quarter of this fiscal year, was evasive on whether he will slash the policy rates in January.<br /><br />Subbarao said he may take some action in the next policy review. The third quarter review of monetary policy is scheduled for January 29, 2013.</p>.<p><br />"If we see that inflation is likely to be coming down even in the January-March quarter, we may take some action in January. But I cannot say anything beyond that," Subbarao said, adding "at its peak, inflation will go up to beyond 8 per cent".<br /><br />"Looking at the current balance between growth and inflation risks, we thought it is appropriate to maintain the policy rate where it is, (which is) just a little bit above the inflation rate; also considering that inflation is going to go up in the next few months," he said.<br /><br />Subbarao, who chose to focus on inflation worries over boosting the steeply fallen growth rate in the policy by cutting the policy rates, described his choice as a "complex challenge" and cited high fiscal and current account deficits as inhibiting factors for an easy money policy.<br /><br />"We have had to restrain demand, even while ensuring flow of credit to productive sectors so as supply constraints are eased," Subbarao said.</p>