The Reserve Bank of India has decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 8% from 7.5% with immediate effect. The reverse repo rate, determined with a spread of 100 basis points below the repo rate, automatically adjusts to 7% with immediate effect.
The cash reserve ratio (CRR) of scheduled banks has been retained at 6% of their net demand and time liabilities (NDTL).
It is expected that these policy actions will:
* Reinforce the cumulative impact of past actions on demand;
* Maintain the credibility of the commitment of monetary policy to controlling inflation, thereby keeping medium-term inflation expectations anchored; and
* Reinforce the point that in the absence of complementary policy responses on bothdemand and supply sides, stronger monetary policy actions are required.
The cash reserve ratio (CRR) of scheduled banks has been retained at 6% of their net demand and time liabilities (NDTL).
It is expected that these policy actions will:
* Reinforce the cumulative impact of past actions on demand;
* Maintain the credibility of the commitment of monetary policy to controlling inflation, thereby keeping medium-term inflation expectations anchored; and
* Reinforce the point that in the absence of complementary policy responses on bothdemand and supply sides, stronger monetary policy actions are required.
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