RBI''s rate hike will help contain inflation: Pranab

New Delhi, Jan 25 (PTI) Finance Minister Pranab Mukherjeetoday said the Reserve Bank''s decision to hike short-termborrowing and lending rates will help contain inflation andwas in line with the government''s policy.

Welcoming the RBI decision to increase the repo andreverse repo rates (short-term borrowing and lending rates) by25 basis points each, Mukherjee said it was aimed at giving "astrong signal to tackle inflationary pressures".

"RBI has taken a decision very correctly to increase therepo rate and reverse repo rate," he added.

The Reserve Bank of India (RBI) also revised inflationtarget to 7 per cent by March-end, from 5.5 per cent projectedpreviously.

The central bank retained the economic growth forecastat 8.5 per cent for the current fiscal with potential for anupward bias.

The RBI measures also include extending additionalliquidity support facility till April 8, 2011.

"Therefore the RBI policy announcement is in conformitywith the thinking and policy of the government," the financeminister said.