RBI move in line with govt policy; to check inflation: Pranab

New Delhi, Jan 25 (PTI) Finance Minister Pranab Mukherjeetoday said RBI''s policy initiatives, including hike in keyrates, are in line with the government thinking and will helpcontain inflation, which shot up to 8.5 per cent in December.

"The policy announced by RBI is in conformity withthinking and policies pursued by the government and I welcomethe announcement by the RBI Governor," Mukherjee toldreporters here.

The central bank today hiked key short-term lendingand borrowing rates by 25 basis points each to checkinflation. The inflation for December rose to 8.43 per cent onrising prices of food items, from 7.48 per cent in theprevious month.

In its third quarter monetary policy review, RBIprojected 7 per cent inflation by the March-end, up from fromits earlier estimate of 5.5 per cent.

"These steps RBI had to take to give a strong signal totackle the inflationary pressure which is in the system...,"Mukherjee said, adding there is a need remove supplybottlenecks and suck out excess liquidity.

The Reserve Bank of India (RBI) had hiked policy ratessix times in 2010.

The central bank retained the cash reserve ratio,the percentage of deposits banks have to park with the RBI,at 6 per cent.

"CRR remains intact to ease the liquidity situation andmake it more comfortable," Mukherjee said.

The RBI measures also include extending additionalliquidity support facility till April 8, from January 28. PTIJD RSN NKD CS MR NS