2 min read.Updated: 18 Jun 2013, 05:21 PM ISTRenu Kohli
Such extreme caution seems unwarranted in the light of past trends
As expected, the Reserve Bank of India (RBI) kept interest rates unchanged on Monday. Recent external developments were a key influence, tying the central bank’s hands even as growth is in the abyss. What defies reason, however, is the RBI’s inflation guidance, which states: “It is only a durable receding of inflation that will open up the space for monetary policy to continue to address risks to growth." This statement departs significantly from the guidance it gave on 3 May, raising the spectre of no further easing, at least in July. Why this pessimism?
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