The Reserve Bank on Tuesday kept the repo rate unchanged at 8 per cent, as expectedGrowing concerns that disappointing monsoon rains will lead to a surge in food prices led to a status quo in monetary policy. RBI Governor Raghuram Rajan said that RBI Cuts SLR by 0.50% to Boost Lending.
Although both wholesale price inflation (WPI) and consumer price inflation (CPI) eased in June, below-average rainfall remains the biggest concern.
Vegetable prices rose 9 per cent while fruit prices rose nearly 21 per cent year on year in June, when monsoon was 48 per cent below average, although rainfall improved in July, the second month of the monsoon season.
The RBI is targeting retail inflation of 8 per cent by January 2015. RBI Governor Raghuram Rajan has maintained that containing inflation is the central bank’s top priority.