India’s reserve bank shocks market by holding lending rate

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The bank also raised its headline inflation projection for the second half of the financial year to between 5.1% and 4.9%

The Indian economy is growing well below the pace needed to generate enough jobs for the millions entering the labour market each monthDaily wage labourers distribute earnings among themselves while waiting for work on a street in New Delhi on December 5 2019. Picture: AFP/PRAKASH SINGH

“I cannot remember the last time there has been such a resounding surprise as far as the RBI decision is concerned. It defies the expectation of the market and also the body language of the central bank over the past six months,” said Taimur Baig, chief economist at DBS Group Research.Many economists and analysts have lately begun to argue that rate cuts alone will do little to revive growth

The central bank also raised its headline inflation projection for the second half of the ongoing financial year to between 5.1% and 4.9%, from an earlier forecast of between 3.5% and 3.7%. Equity markets fell after the decision and were choppy throughout the rest of the session. The broader Nifty share index closed down 0.2%.

Annual retail inflation rose to 4.62% in November, climbing above the midpoint of the RBI’s target range of 2%-6% for the first time in 15 months.

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