RBI Governor Raghuram Rajan surprised the markets today by leaving all key policy rates unchanged, notwithstanding persistent high inflationary pressure.
The short-term lending rate was kept unchanged at 7.75 per cent, while the cash reserve ratio (CRR) remained at 4 per cent, the Reserve Bank of India said in its Mid-Quarter Monetary Policy Review.
The decision to keep rates unchanged will be a big breather for the industry and retail borrowers in particular as the markets had expected another 25 bps hike in the short-term lending rate.
The Reserve Bank said it will take "calibrated action" in the future, based on inflationary trends and action by the US Federal Reserve.
The status quo decision came as a surprise as only last week the RBI had pulled up banks for not helping it in monetary policy transmission.
Since taking over as the RBI chief in September, Rajan had increased the key rate by 0.50 per cent in two instalments.