Raghuram Rajan again holds rates in his last monetary policy update

Reserve Bank of India (RBI) Governor Raghuram Rajan kept key policy rates unchanged in his last monetary policy review with little elbow room on account of the country's retail inflation inching closer to the upper tolerance level of 6 percent

Reserve Bank of India (RBI) Governor Raghuram Rajan kept key policy rates unchanged in his last monetary policy review with little elbow room on account of the country's retail inflation inching closer to the upper tolerance level of 6 percent.

Raghuram Rajan. Pic/PTI

Accordingly, the repurchase (repo) rate or the interest commercial banks pay the central bank for short-term loans, remains unchanged at 6.5 per cent. The cash reserve ratio (CRR) that scheduled banks have to keep in the form of liquid funds also remains unaltered at 4 per cent of deposits.

In the previous policy update, too, conducted on June 7, the policy rates were left unaltered. This is also the last monetary policy update that will afford the central bank governor to fix policy rates with the government set to entrust the task to a soon-to-be-constituted Monetary Policy Committee. The target inflation rate has already been set at 4 percent -- plus or minus 2 percentage points.

"Recent sharper-than-anticipated increase in food prices has pushed up the projected trajectory of inflation over the rest of the year," Rajan said, adding: "Strong improvement in sowing on the back of good monsoon rains and supply-side management auger well for food inflation outlook."

"In view of this configuration of risks, it's appropriate for the Reserve Bank to keep the policy repo rate unchanged at this juncture, while awaiting space for action. The stance of monetary policy remains accommodative and will continue to emphasise adequate provision of liquidity."

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