The Reserve Bank of India left its benchmark lending rate unchanged Tuesday as it waited for more signs that inflation in Asia’s third-largest economy is retreating.

The Indian central bank kept its overnight lending rate steady at 8% for its fourth policy meeting in a row. The decision was in line with the forecast of the dozen economists polled by The Wall Street Journal, who unanimously predicted Governor Raghuram Rajan would keep the repurchase rate steady.

“With international crude prices softening and relative stability in the foreign exchange market, some upside risks to inflation are receding,” Mr. Rajan said in his monetary policy statement. “Yet, there are risks from food price shocks as the full effects of the monsoon’s passage unfold, and from geopolitical developments that could materialize rapidly.”

By leaving rates at a level many executives and politicians consider detrimental to India’s growth, Mr. Rajan has boosted his reputation as an inflation hawk.

He is also making good on his pledge to prepare India for the end of the easy-money policy in the developed world. The central bank governor is worried that emerging markets could be hard hit as they have become reliant on the extra liquidity that has been sloshing around the globe.

Accommodative policy in advanced economies has fostered investor risk appetite and increased and spread to various asset classes, the RBI noted. The central bank pointed to risks stemming from a sudden correction in financial markets if investors misread the timing of a reversal in the U.S. monetary policy stance, and from a further slowdown in the euro area.
Source: MarketWatch

Source: MarketWatch