Home Economy Highlights of Indian central bank’s monetary policy update

Highlights of Indian central bank’s monetary policy update


Mumbai : Following are the highlights of monetary policy update conducted by Reserve Bank of India (RBI) Governor D. Subbarao that saw key rates hiked by a steep 50 basis points Tuesday:

* Repurchase rate, or short-term lending rate, hiked to 8 percent from 7.5 percent

* Reverse repurchase rate, or short-term borrowing rate, hiked to 7 percent from 6.5 percent

* Cash reserve ratio retained at 6 percent

* Statutory liquidity ration retained at 24 percent

* Bank rate untouched at 6 percent

* Inflation expected to remain elevated for few more months

* Moderation in inflation seen toward latter part of year

* Projection on annual inflation for year-end at 7 percent, against 9.4 percent now

* Projection on growth left unchanged at 8 percent for current fiscal

* Intention to maintain interest rate environment that moderates inflation

* Policy also tuned to manage risk of falling growth

* Measures to manage liquidity without undue stress on financial system

* Outlook for global crude oil prices uncertain in the near future

* High global commodity prices may also exert pressure on domestic inflation

* High global crude prices, domestic fuel subsidies will impact inflation

* This year’s monsoon may impact yields of grains, pulses, oilseeds and cotton

* Inadequate supplies may keep prices of eggs, meat, fish, milk and pulses high

* Government’s fiscal deficit target of 4.6 percent now a major challenge

* Real estate markets have remained firm

* Next mid-quarter review of monetary policy Sep 16

* Second quarter review of monetary policy Oct 25