The Reserve Bank of India on 26th July 2010 released the document Macroeconomic and Monetary Developments: First Quarter Review 2010-11, which serves as a background to the First Quarter Review of Monetary Policy 2010-11 to be announced on July 27, 2010.
The Reserve Bank has been released the RBI Reverse Repo Rate or RBI First Quarter Review of Monetary Credit Policy 2010-11.
RBI First Quarter Review of Monetary Credit Policy 2010-11 of Reserve Bank of India at a meeting of the chief executives of major banks. The important decisions contained in the review were to raise the repo rate from 5.5 per cent to 5.75 per cent and the reverse repo rate from 4 per cent to 4.50 per cent. This asymmetric raise in rates narrows the LAF corridor from 150 basis points to 125 basis points.
The Credit Policy that RBI changed with the hike in CRR is somewhat unexpected. However, people also feel that the inflation status in 2010 required such a hike. The inflation projection, (Wholesale Price Index) has been raised too. The inflation projection is now 8.5 percent for March 2010, whereas earlier it was 6.5 per cent. The economists say that if India has a rather normal monsoon this year, then the inflation should be in control by July. However, the factor also depends hugely on global price movements like the oil prices. The RBI Credit Policy change, that was witnessed today was mostly to drain a high amount of liquidity from the economy (along Rs 36,000 Crore). The measure was taken in order to combat the rising inflation. The movements of inflation will also control The RBI’s Monetary policy for the remainder of the 2009-2010 period.
Following are the highlights of the first quarter review of monetary policy for fiscal 2010-11 presented by Reserve Bank of India Governor D. Subbarao to chief executives of commercial banks here Tuesday:
– Repo rate hiked by 25 basis points to 5.75 percent
– Reverse repo rate hiked by 50 basis points to 4.5 percent
– Cash reserve ratio unchanged at 6 percent
– Statutory Liquid ratio unchanged at 25 percent
– Bank rate unchanged at 6 percent
– Inflation outlook raised to 6 percent by the end of March 2011 from 5.5 percent projected earlier
– Growth in the gross domestic product for this fiscal is projected at 8.5 percent against 8 percent earlier.
– Monetary policy intended to inflation and anchor inflationary expectations and respond to any further build-up of inflationary pressures
– Rate hike will help maintain financial conditions conducive to sustaining growth
– RBI will undertake mid-quarter reviews in about 45 days after each quarterly review
– Next mid-quarter reviews will be in September, December and March
– Second quarter review of monetary policy on November 2, 2010
For more details about this RBI Reverse Repo Rate or RBI First Quarter Review of Monetary Credit Policy 2010-11, Please Visit:
http://www.rbi.org.in/Scripts/Annualpolicy.aspx
http://www.rbi.org.in/home.aspx
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Tags: credit policy, Reserve Bank of India
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