MUMBAI: India’s Raghuram Rajan kept interest rates on hold on Tuesday in a bid to wrestle down inflation, in his final policy review as central bank chief.
In a widely expected move, the popular Reserve Bank of India governor said he would hold the benchmark repo rate, the level at which it lends to commercial banks, at 6.50 percent.
Twenty six out of 27 economists in a Bloomberg News survey predicted the bank would hold rates, after it cut them by 25 basis points in April to their lowest level since early 2011.
“In view of configuration of risks, it is appropriate for the reserve bank to keep the policy repo rate unchanged,” Rajan said in a statement.
Rajan has slashed interest rates over the past 18 months, but the government wanted deeper cuts, saying these would boost growth further.
India’s economy expanded by 7.9 percent in the fourth quarter of 2015-16, the fastest of any major economy.
The government is yet to announce a successor to Rajan, two months after he announced he was stepping down in September when his term finishes and returning to academia in the United States.
Rajan, who has made controlling inflation a priority, has been widely credited with bringing stability to India’s economy since taking over the RBI reins in September 2013.
But his policy making decisions have been criticised by a prominent member of Prime Minister Narendra Modi’s Hindu nationalist party and he has also clashed with the government.
Rajan, who famously predicted the 2008 global financial crisis, has brought down double-digit inflation during his tenure. He has set a goal of limiting inflation to 5 percent by March 2017.
But inflation inched upwards to 5.77 percent in June.
The monsoon currently sweeping India has brought much-needed relief to millions of farmers who rely heavily on the annual rains for their crops. But food prices are still high in some rural areas that have been suffering from two years of crippling drought.