RBI leaves rate unchanged,sees more upside risks to inflation

Tuesday, Jun 7, 2016,11:36 IST By Metrovaartha A A A

Mumbai | RBI Governor Raghuram Rajan today kept the key policy rate unchanged citing higher upside risks to ‘inflation trajectory’ but said the central bank will remain accommodative provided data are supportive.

Accordingly, Rajan retained the short-term lending rate at 6.5 and the cash reserve requirement of banks at 4 per cent. The inflation surprise in the April reading makes the future trajectory of inflation somewhat more uncertain, rising crude prices and implementation of the seventh pay commission awards being the key risks, Rajan said in the second bimonthly monetary policy for the current fiscal.

Explaining the rationale for keeping the rates unchanged, Rajan said: Incoming data since the April policy announcement show a sharper-than-anticipated upsurge in inflationary pressures emanating from a number of food items (beyond seasonal effects), as well as a reversal in commodity prices.

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