The Hindu Business Line : ‘CRR, repo rate hike will curb inflation’

New Delhi, June 25 The Finance Ministry on Wednesday said that the latest monetary measures of the Reserve Bank of India are expected to have a “salutary effect” on inflation.

It also noted that the RBI’s move to hike repo rate and cash reserve ratio (CRR) by 50 basis points each should augur well for the economy besides giving a boost to the confidence of investors both domestic and foreign.

In a statement issued here, a day after the RBI announced hike in CRR and repo rate, the Finance Ministry said that these steps were necessary in the wake of rising inflation due to relentless increase in crude oil prices.

On June 20, the trading day preceding the Jeddah meeting, crude oil price on the NYMEX was $134.63 per barrel. On Wednesday (June 25) morning, it was $136.80 a barrel.

The Finance Ministry had late last week indicated that the monetary authorities were expected to take action on the demand side to moderate inflation and quell inflationary expectations.

The objective of the RBI is to moderate and manage aggregate demand. The intention is to achieve the objective while ensuring that the prospects for overall economic growth remain positive, the statement added.

On the food stocks front, the Finance Ministry said that “very satisfactory” stocks of wheat and rice are available, adequate supplies would be provided to the public distribution system (PDS) and stocks will be sold in the open market, when necessary, to restrain prices.

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