India’s central bank hits pause button on rate hikes

December 16th, 2011 - 1:59 pm ICT by IANS  

Mumbai, Dec 16 (IANS) India’s central bank Friday kept key rates unchanged - after as many as 13 successive hikes since early 2010 - in a bid to spur growth, while also drawing some comfort from the easing of annual inflation.

“While inflation remains on its projected trajectory, the downside risks to growth have clearly increased,” the Reserve Bank of India (RBI) said in a statement, presenting the mid-quarter review of the monetary policy for the current fiscal.

“The guidance given in the second quarter was that, based on the projected inflation trajectory, further rate hikes might not be warranted. In view of the moderating growth momentum and higher downside risks to growth, this guidance is being reiterated.”

The central bank also said that from this point onward, the effort would be to reverse the cycle, which effectively means industry can even hope for some easing of interest rates in the coming months.

The review came against the backdrop of India’s annual rate of inflation falling to 9.1 percent in November, while the food inflation fell to 4.35 percent for the week ended Dec 3.

But factory output declined 5.1 percent in October, while the gross domestic product saw a mere 6.9 percent growth during the second quarter of this fiscal, which was the lowest in over two years.

The Reserve Bank said it maintained its projection for annual inflation at 7 percent for end-March, while reserving its forecast on growth for the third quarter review, which is expected in January.

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