Reuters

Mumbai: RBI kept its key lending rate steady at 8.0% as expected on Friday, to gauge the impact of a hefty, surprise cut earlier this week to cushion the economy from the global financial crisis.

The central bank also left the cash reserve ratio, the amount of funds that banks have to keep on deposit with it, unchanged at 6.5%, but lowered its 2008-09 growth forecast to 7.5 to 8.0% from a previous forecast of around 8.0%.

Read highlights of RBI decision

It said the current challenge was to strike an “optimal balance” between preserving financial stability, price stability, anchoring inflation expectations and sustaining growth.

“To manage this challenge the central bank has deployed and will continue to deploy both conventional and unconventional tools,” it said.

The central bank already cut the repo rate, at which it infuses cash into the banking system, for the first time in more than four years on Monday, as part of a slew of steps by the authorities to shore up confidence as global recession fears grip investors worldwide.

On Friday it left the reverse repo rate, the rate at which it absorbs excess cash from banks, steady at 6%. The bank rate remained at 6%.

A Reuters poll of analysts this week suggested the central bank was expected to hold key rates unchanged at its policy review. Eleven out of 12 economists polled expected no change in the repo rate after Monday’s cut. Other key rates were also forecast to be left unchanged.

Click to read the statement