Finally, the RBI Governor mustered some courage to hike the much needed Repo and Reverse Repo rates by 25bps and 50 bps during its monetary policy review meeting today. With this, the repo rate will stand at 5.75% and reverse repo rate will go up to 4.5%. Meanwhile, CRR has been kept unchanged at the current level of 6.0%. Story Updating..
RBI embarked on gradual exit from an overtly accommodative monetary stance, while ensuring that the nascent recovery is not
derailed. Thereafter, as recovery gathered momentum and so did inflation, RBI’s stance was one of balancing the objectives of managing the recovery while keeping an eye on the price situation. However, as recovery gathered pace in H1CY10, deterioration in inflation outlook started dominating the minds of policymakers such that in the current move, inflation and inflation expectations seem to have attained the top priority. RBI now states “with growth taking firm hold, the balance of policy stance has to shift decisively to containing inflation and anchoring inflation expectations”.