India keeps rates on hold
INDIA’S Raghuram Rajan kept interest rates on hold yesterday in a bid to wrestle down inflation, in his final policy review as central bank chief.
In a widely expected move, the popular Reserve Bank of India governor said he would hold the benchmark repo rate, the level at which it lends to banks, at 6.50 percent.
Twenty-six out of 27 economists in a Bloomberg News survey predicted the bank would hold rates, after it cut them by 25 basis points in April to their lowest level since early 2011.
“In view of configuration of risks, it is appropriate for the reserve bank to keep the policy repo rate unchanged,” Mr Rajan said.
He has slashed interest rates over the past 18 months, but the government wanted deeper cuts, saying these would boost growth further.
India’s economy expanded by 7.9pc in the fourth quarter of 201516, the fastest of any major economy.
The government is yet to announce a successor to Mr Rajan, two months after he announced he was stepping down in September when his term finishes and returning to academia in the United States.
Mr Rajan, who has made controlling inflation a priority, has been widely credited with bringing stability to India’s economy since taking over the RBI in September 2013.
But his policy decisions have been criticised by a prominent member of Prime Minister Narendra Modi’s Hindu nationalist party and he has also clashed with the government.
Mr Rajan, who famously predicted the 2008 global financial crisis, has brought down double-digit inflation during his tenure. He has set a goal of limiting inflation to 5pc by March 2017. But inflation inched upward to 5.77pc in June. –