Hike in Repo rate to be anti-inflationary: FM

New Delhi, Jan 31: Finance Minister P Chidambaram today said an increase in the repo rate announced in the Third Quarter Review of the Monetary Policy by the RBI would have a deleterious impact on inflation.

''The policy is on expected lines. The purpose is to signal that the banking sector should moderate credit growth,'' Mr Chidambaram told newspersons here.

''Monetary policy decisions take time to work, but I am confident it will have a favourable impact on inflation,'' he said.

The Government and the Central Bank are one in trying to curtail inflation, which touched a two-year high of 6.12 per cent in the first week of January. There is a consensus view among the Finance Ministry and RBI that there were underlying inflationary pressures and expectations in the economy.

The RBI today hiked the repo rate by 25 basis points to 7.5 per cent, while leaving the reverse repo rate, bank rate and CRR unchanged.

The RBI raised the GDP growth forecast to 8.5 to nine per cent from the earlier projection of eight per cent. However, the RBI maintained its full-year inflation target at 5-5.5 per cent.

''The monetary policy stance is to maintain high growth with price stability,'' RBI Governor Y V Reddy said.

UNI

Related Stories