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RBI seeks to maintain an interest rate to check inflation: Mukherjee


June 16, 2011 - New Delhi

Union Finance Minister Pranab Mukherjee on Thursday said the Reserve Bank of India (RBI) has sought to maintain an interest rate environment that moderates inflation and checks inflationary expectations.

"By announcing an increase of 25 basis points in repo rate, from the existing 7.25 per cent to 7.50 per cent, RBI has sought to maintain an interest rate environment that moderates inflation," Mukherjee said.

"This was on expected lines, as the core inflation hardened to 8.71 per cent in May 2011 in comparison to 7.93 per cent in April 201," he added.

Mukherjee further said that there was a need to have better price stability for sustaining growth in the medium-term.

The RBI today raised key short-term lending and borrowing rates by 25 basis points for the tenth time since March 2010.

The short-term lending or repo rate has been raised to 7.5 percent, and the borrowing rate has been hiked to 6.5 percent.

The central bank has kept other rates and ratios unchanged.

It is speculated that this move of the RBI could make auto and home loans expensive.

"The policy initiative is expected to contain inflation and anchor inflationary expectations by reining in demand side pressures. The measures, would also help in mitigating the impact of potentially adverse global developments," said the RBI, and added that it would continue with its anti-inflationary stance to keep a check on price rise.

ANI

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