RBI ON A WAIT AND WATCH MODE !

RBI Governor, DR. Raghuram Govind Rajan

Surprising the Market RBI has kept the indicative policy rates Repo (7.75%) and Cash Reserve Ratio, CRR(4%) unchanged although the inflation rates remained high. CPI inflation stood high at 11.24% in November, its the highest since the new composite index was introduced. Headline WPI inflation stood at 7.52%, well above the RBI's comfort level.

RBI expects that the food inflation wood soften in the days to come which will considerably bring down the overall inflation.It also believes that the dis inflationary impact of stable exchange rates will ease the pressure on prices. Liquidity conditions have also improved due to higher capital inflows from abroad in the wake of special facilities like FCNR(B) window to acquire funds from Non Resident Indians.

However RBI maintains that if the expected softening of food inflation does not materialize or if core inflation(excluding food and fuel) does not fall, the RBI will act including on off-policy dates if warranted.