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It’s status quo on Rajan’s birthday!

Raghuram Rajan

Mumbai: It was his birthday today, but there was no party in store for the markets when RBI Governor Raghuram Rajan announced a status-quo on interest rates.

52-year-old Rajan, who became RBI chief in September 2013, today chose to keep interest rate unchanged for the seventh time, out of 11 monetary policy decisions taken under his regime so far.

At the post policy press conference here today, reporters wished him ‘happy birthday’, which he acknowledged with a smile but did not say anything.

He had a busy day even on his birthday with the first half taken over by the policy announcement and media interaction after which he rushed for Delhi for an investor conference to be followed by another analyst conference call tomorrow back in Mumbai.

Stock markets fell sharply soon after the policy was announced, with banking stocks falling the most.

During the first nine months of the current fiscal, the Governor did not change policy rate in the five consecutive bi-monthly policies and kept repo (short term lending) rate at 8 per cent till December 2014.

However, the trend was broken outside the policy review cycle when in a surprise move, Rajan cut repo rate by 0.25 per cent on January 15 after maintaining a hawkish monetary stance for 20 months.

Subsequently, the policy repo rate was slashed by 25 basis points from 8.0 per cent to 7.75 per cent.

Previously, the RBI had reduced the repo rate in May, 2013 when it cut the rate from 7.5 per cent to 7.25 per cent. Ever since, the rates have been going up and remained at 8 per cent since January 2014.

In his first monetary policy review on September 20, 2013, Rajan had raised 0.25 per cent from 7.25 per cent to 7.5 per cent in his bid to tame inflation.

Continuing his fight against inflation, RBI Governor in the second policy review on October 29, 2013, he revised upward rate by 0.25 per cent to 7.75 per cent.

He, however, put a pause in the third policy review under him when he maintained the repo rate at 7.75 per cent on December 18, 2013.

Surprising the market, the repo rate was increased by 0.25 per cent in January last year to 8 per cent by Rajan.

The Reserve Bank today left interest rate unchanged at 7.75 per cent saying there was no substantial development on inflation or fiscal fronts to warrant a fresh reduction.

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