Reserve Bank of India governor Raghuram Rajan surprised the markets, today, by leaving all key policy rates unchanged. The Reserve Bank, in its Mid-Quarter Monetary Policy Review, kept its short-term lending rate unchanged at 7.75 per cent, and the Cash Reserve Ratio steady at 4 per cent. The RBI governor said the apex bank will take calibrated action in the future, based on inflationary trends and action by the US Federal Reserve.

Sounding a note of caution, the RBI governor said the policy decision is a close one, and current inflation is too high. But given the wide bands of uncertainty surrounding the short-term path of inflation, and given the weak state of the economy, there is merit in waiting for more data to reduce uncertainty.

Commenting on the RBI policy, the chairman of the Prime Minister's Economic Advisory Council, C. Rangarajan called it a difficult balancing act.