By CentralBankNews.info
    India’s central bank maintained its benchmark repo rate at 8.0 percent, as widely expected, but struck a slightly dovish tone by saying the balance of risks to inflation meeting the bank’s target were somewhat lower than in early August though they still remain to the upside.
    The Reserve Bank of India (RBI), which raised its repo rate by 75 basis points from September 2013 to January 2014, said the continuing risks around inflation “warrant policy preparedness to contain pressure if the risks materialize” so the “future policy stance will be influenced by the Reserve Bank’s projections of inflation relative to the medium term objective.”
    At its previous policy report on Aug. 4, the RBI had warned of upside risks to its inflation target that warranted “a heightened state of policy preparedness” to contain any risks if they materialize.
    The RBI’s medium-term objective under Governor Raghuram Rajan is to reduce consumer price inflation to 6 percent by January 2016 with a desired decline to 8 percent by January 2015.
    Since June India’s headline inflation rate has dropped below 8 percent and fell to 7.8 percent in August from 7.96 percent in July.
   “The most heartening feature has been the steady decline in inflation excluding food and fuel, by a cumulative 111 basis points since January 2014 to a new low,” Rajan said in a statement, adding that softening crude prices and a stable exchange rate had led to a receding of upside risks.

   “Yet, there are risks from food price shocks as the full effects of the monsoon’s passage unfold, and from geo-political developments that could materialize rapidly,” he added.
   In August, the RBI also trimmed the statutory liquidity ratio (SLR) by a further 50 basis points to 22.5 percent – it had already cut it by 50 basis points in June – but today it left it unchanged, just as the cash reserve ratio (CRR) was maintained at 4.0 percent.
    But the RBI reduced the amount of liquidity that it provides under its export credit finance (ECR) facility to 15 percent from 32 percent.
   (TO BE CONTINUED…)