Highlights of Indian central bank’s monetary policy update

July 26th, 2011 - 1:25 pm ICT by IANS  

Mumbai, July 26 (IANS) 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

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