Mumbai: The Reserve Bank of India (RBI) kept its policy rate on hold at 7.25 per cent on Tuesday, as widely expected, while leaving the door open to ease further depending on the inflation outlook and how swiftly banks lower their lending rates. The RBI also said government economic reforms and the timing of any increase in US interest rates would be key factors that will determine whether the central bank cuts rates for a fourth time this year. "It is prudent to keep the policy rate unchanged at the current juncture while maintaining the accommodative stance of the monetary policy," the RBI said in its statement. "As the Reserve Bank awaits greater transmission of its front-loaded past actions, it will monitor developments for emerging room for accommodation."
The next policy review is set for Sept. 29. Any increase in US rates decided at a Federal Reserve meeting earlier that month is expected to suck money out of emerging markets.
The RBI has reduced its policy rate by three-quarters of a percentage point since embarking on an easing cycle in January. The last cut lowered the repo rate to 7.25 per cent on June 2.