Price stability to be maintained at all costs: Reddy

New Delhi, Jan 31 (UNI) RBI Governor Y V Reddy today said the Central Bank would be willing to use all monetary tools and instruments, including the Cash Reserve Ratio, to keep a check on liquidity overhang and curtail inflationary expectations, while ensuring that growth prospects are not hampered, ''The main thrust of the of third quarter credit review policy is to ensure robust growth and maintain price stability. If need be we will take recourse to other policy instruments, including the CRR, to keep prices under check,'' Mr Reddy said in a Video Conference.

Journalists from Delhi, Mumbai, Chennai and Kolkata participated in the Video Conference.

''Inflation is to be brought down to as close as possible to 5-5.5 per cent at the earliest, while continuing to pursue the medium term goal of a ceiling on inflation at five per cent,'' Mr Reddy said adding that price rise was not just a factor of monetary policy but also other factors. These included aggregate demand, global economic situation and supply side constraints.

Mr Reddy agreed to a questionairre that the Central Bank had pitched for an interest rate scenario to ensure that capital flows remain robust.

The RBI Chief also did not think that measures to curb inflation would impact adversely on growth prospects. ''Infact, a high rate of inflation is inconsistent with high GDP growth and low inflation complimentary to such a growth.'' ''Over the remaining part of the year, management of liqudity would receive priority in the policy hierarchy. Consquent upon the tightening of market liquidity, the impact of monetary policy is expected to be stronger than before,'' Mr Reddy said.

The RBI forecast a GDP growth rate of 8.5 to nine per cent during 2006-07.

While Repo rate under the Liqudity Adjustment Facility (LAF) has been hiked in the credit policy by 25 basis points, reverse repo rate and and Bank rate have been kept unchanged at six per cent.

Mr Reddy gave a clear impression that RBI would do nothing to dampen the spirits of the India growth story, but would resort to even drastic measures to curb demand to keep a check on prices.

He, however, warned the Corporates to take into account the exchange rate risks as well as global political risks while going in for any overseas expansion spree.

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