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Indian central bank keeps rates steady
03 Jun, 2014 11:40:17
MUMBAI, June 3, 2014 (AFP) - India's hawkish central bank kept key interest rates unchanged Tuesday at its first meeting to set monetary policy since new pro-growth Prime Minister Narendra Modi took office.
After meeting in the financial capital Mumbai, the Reserve Bank of India (RBI) said the benchmark repo rate, at which it lends to commercial banks, would remain steady at 8.0 percent.

Analysts have suggested the anti-inflation policies of central bank chief Raghuram Rajan may clash with Modi's aim of reviving the economy.

But Rajan said Tuesday that if the economy stays on its disinflationary course, "further policy tightening will not be warranted".

"If disinflation, adjusting for base effects, is faster than currently anticipated, it will provide headroom for an easing of the policy stance," added the former International Monetary Fund chief economist.

Rajan has hiked interest rates three times since taking the helm last September.

Business leaders have been calling for lower borrowing costs to spur an economy which expanded by 4.7 percent last year -- the lowest level in nearly a decade, and half the rate seen during India's boom years.

But with consumer inflation nudging 10 percent and fears that a weak monsoon could push food prices higher, the RBI had scant scope to loosen monetary policy, economists said.

Modi's right-wing Bharatiya Janata Party swept to victory last month, ousting the left-leaning Congress, and he faces huge public expectations to live up to election promises of "better days ahead".

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