India's central bank keeps major interest rate unchanged

To combat inflation and consolidate the economical growth, India's central bank he Reserve Bank of India (RBI) announced to keep its repo rate at 7.75 on Thursday. The central bank maintained the reverse repo at 6.75%, the cash reserve ratio at 4% and the marginal standing facility and the bank rate at 8.75% followed what seemed to be strong signals that an increase was all but inevitable in the face of unrelenting inflation. The decision was taken during the mid quarter review of India' s monetary policy for the current fiscal undertaken by Reserve Bank of India Governor Raghuram Rajan. "The policy decision is a close one. Current inflation is too high," Rajan said in a statement. "However, given the wide bands of uncertainty surrounding the short term path of inflation from its high current levels, and given the weak state of the economy, the inadvisability of overly reactive policy action, as well as the long lags with which monetary policy works, there is merit in waiting for more data to reduce uncertainty." India is struggling with sluggish economic growth, which dropped to a decade-low 5% in the year to March. Growth was 4.4% in the first quarter and 4.8% in the second quarter.