Highlights of the third quarter review of monetary policy

January 24th, 2012 - 2:41 pm ICT by IANS  

Mumbai, Jan 24 (IANS) The following are the highlights of the third quarter review of the monetary policy unveiled by the Reserve Bank of India Tuesday:

– Cash reserve ratio lowered by 50 basis points to 5.5 percent from 6 percent

– This step will release Rs.320 billion into the system

– Reduction can be viewed as a reinforcement of the guidance that future rate actions will be towards lowering them

– Repurchase rate, or short-term lending rate, retained at 8.5 percent

– Reverse repurchase rate, or short-term borrowing rate, stands at 7.5 percent

– Bank rate untouched at 6 percent

– Growth slowing due to uncertain global environment, cumulative impact of past monetary policy tightening and domestic policy uncertainties

– Projection on growth lowered to 7 percent from 7.6 percent for current fiscal

– Moderation in inflation reflects sharp deceleration in prices of seasonal food items

– Inflation in protein-based food items and non-food manufactured products still high

– Upside risks to inflation arise from global crude oil prices, rupee depreciation and slippage in fiscal deficit

– Inflation projected to moderate to 7 percent by March-end

– Intention to maintain interest rate environment that moderates inflation

– Policy also tuned to manage risk of falling growth

– Measures intended to manage liquidity to ensure it remains in moderate deficit, consistent with effective monetary transmission

– Forthcoming budget should concentrate on fiscal consolidation

– Administrative actions should induce investment for alleviating supply constraints in food, infrastructure

– Next mid-quarter review of monetary policy March 15

– Monetary policy for 2012-13 will be on April 17

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