Rate hikes will help curb price rise, says Pranab

March 17th, 2011 - 7:22 pm ICT by IANS  

Pranab Mukherjee New Delhi, March 17 (IANS) Finance Minister Pranab Mukherjee said Thursday the Reserve Bank of India’s move to hike key policy rates by 25 basis points would help curb inflationary pressure.

“This (rate hike) is good. I do have a hope that it will have a salutary impact on the inflationary pressure,” Mukherjee told reporters here after the country’s central bank raised key policy rates for the eighth time in 15 months to tame stubborn inflation.

The central bank hiked the repurchase or repo rate to 6.75 percent from 6.5 percent and reverse repo rate to 5.75 percent from 5.5 percent.

The finance minister said the 25 basis points increase in repo and reverse repo rates were in tandem with the government’s fiscal policy.

In the mid-quarter review of the monetary policy, Reserve Bank of India Governor Duvvuri Subbarao also revised upward the inflation forecast sharply to 8 percent by end-March, from 7 percent forecast in January, and a lower 5.5 percent in November. The projection on growth rate has been retained at 8.5 percent.

Revising his earlier projects, Mukherjee said inflation was likely to remain 7.5 percent by March-end. “By March-end we can say it will be around 7.5 percent.”

The finance minister had earlier said inflation would come down to 7 percent by the end of the current fiscal.

Inflation rose marginally to 8.31 percent in February from 8.23 percent in the previous month.

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