RBI skips a rate cut

Reflecting an apparent disconnect with the government, the Reserve Bank continued its cautious stance, refusing to lower interest rates, disappointing finance minister P Chidambaram and the industry, while it brought down the cash reserve ratio by 0.25% to inject Rs 17,500 crore.
“Managing inflation and inflationary expectations remains the primary focus of the monetary policy,” RBI governor D Subbarao said while unveiling the second quarter policy review. He said that persistently high inflation remained a “key challenge” and growth had slid.
A disappointed Chidambaram said, “Growth is as much a challenge as inflation. If the government has to walk alone to face the challenge of growth, then we will walk alone. Sometimes, it is best to speak. Sometimes, it is best to be silent. This is the time for silence,” he said.
The CRR—the portion of deposits banks park with the RBI—now stands at 4.25% while repo, the rate at which RBI lends to banks, has been retained at 8%.
Reverse repo, the rate at which RBI borrows from banks, remains at 7%. The CRR cut will be effective from November 3.