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Reserve Bank monetary policy will ease inflation claims Pranab Mukherjee

By Nitsi

New Delhi, July 27 (ANI): Finance Minister Pranab Mukherjee on Tuesday said the Reserve Bank India (RBI) decision to raise short-term key rates would check inflation without hurting growth.

In a statement after the RBI announced its new credit policy, Mukherjee said: "I expect this policy will lead to further easing of inflation which already is going down and it should also keep us fully on track in terms of growth."

He expressed happiness over the new policy said that the bank has not only raised policy rates but also narrowed down the spread between the repo and reversed repo rates.

" The RBI has not only raised policy rates but has narrowed down the spread between repo and reverse repo rates for a more efficient financial system," he said. Mukherjee further asserted that this would lead to a more efficient financial system.

The RBI has raised short term lending or repo rate by 0.25 percentage points. The short-term borrowing or reverse repo rate has been hiked by 0.50 percentage point to 4.50 per cent.

The cash reserve ratio or CRR and bank rate have been kept unchanged at six per cent. t also raised economic growth forecast to 8.5 per cent for 2010-11 fiscal from earlier eight per cent.

Earlier, RBI had hiked repo and reverse repo rates by 0.25 percent as inflation remained above ten percent for the fifth month in succession.

RBI's projection of a higher inflation than the earlier estimate could partly be attributed to the government's move of raising fuel prices.

In June, the government raised petrol prices by Rs 3.5 a litre while decontrolling them and hiked diesel prices by Rs two a litre, LPG by Rs 35 a cylinder and kerosene by three a litre. (ANI)

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