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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

India’s central bank keeps rates at 6.25 pc

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MUMBAI: India’s central bank held interest rates in line with analysts’ expectations on Wednesday, rebuffing the finance ministry’s desire for a cut after India’s growth slowed.


The Reserve Bank of India (RBI) said the benchmark repo — the level at which it lends to commercial banks — would remain at 6.25 per cent.


It was the fourth consecutive monetary policy committee meeting where rates have been left unchanged.


Forty-eight out of 50 economists surveyed by Bloomberg had predicted that the rate would be held despite India’s growth slowing to 6.1 per cent in the recently ended fourth quarter.


The fall in GDP, reported last month, came after the government’s shock move in November to ban most of the country’s currency in circulation.


A rate cut encourages consumers to spend, usually causing a spur in growth, and Indian Finance Minister Arun Jaitley called for a reduction in the rate this week owing to a sharp fall in inflation.


Consumer prices rose at just 2.99 per cent in April from a year earlier, a record low, but the RBI — headed by governor Urjit Patel — said it needed to wait and see whether those levels would remain or spike before moving on rates.


“Premature action at this stage risks disruptive policy reversals later and the loss of credibility.


Accordingly, the MPC decided to keep the policy rate unchanged with a neutral stance and remain watchful of incoming data,” it said in a statement.


The central bank last cut the interest rate in October when it was reduced by 25 basis points to 6.25 per cent, the lowest level since November 2010.


That cut came shortly before Prime Minister Narendra Modi stunned the country by removing all Rs 500 (around $7.50) and Rs1,000 notes from circulation.


He defended it as a necessary strike against corruption but critics say it hurt some of the poorest in society while analysts insist the full impact of the note ban is still not known.


The RBI said GST “is not expected to have a material impact on overall inflation”.— AFP


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