A resolute Reserve Bank of India (RBI) refrained from reducing policy repo rate in its mid-quarter review of monetary policy on June 17, 2013 citing the persistently high food inflation even though general inflation has declined.
Thus, the policy repo rate under the liquidity adjustment facility (LAF) remains unchanged at 7.25 per cent and the reverse repo rate remains at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.25 per cent. The central bank also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of their net demand and time liabilities.
Since the beginning of 2013, RBI has slashed repo rate by 75 basis points and cut cash reserve ratio (CRR) by 25 basis points.
In a press release, RBI said, “given that food inflation remains high, the inflation outlook will be influenced by concerted efforts to break food inflation persistence. The inflation outlook going forward will be determined by suppressed inflation being released through revisions in administered prices, including the minimum support prices (MSP) as well as the recent depreciation of the rupee,”.
Headline WPI inflation eased for three months in succession with the May reading at 4.7 per cent, down from an average of 7.4 per cent in 2012-13. All constituent categories, barring food, have moderated. Still elevated food inflation, particularly in respect of cereals and vegetables, sustained upside pressures on overall inflation.
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