The RBI's decision to cut banks' cash reserve requirements indicates its easing bias in acknowledgement of government steps last week to cut subsidies, says D.K. Joshi, chief economist at ratings firm Crisil. Cuts to the main lending rate going forward may depend on inflation trends which could be affected by global commodity prices, Mr. Joshi adds. "This (RBI decision) is a recognition of the steps taken by the government." However, "there is cautious optimism on the part of the RBI," he adds. The RBI earlier left its key lending rate unchanged at 8.0% due to high inflation but cut banks' cash reserve ratio by a quarter-percentage-point. Last week the government raised state-regulated diesel prices to cut its subsidies, a long-sought move that the RBI had been pressing for before it lowers interest rates.
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