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The Reserve Bank of India (RBI) move to hike repo rates by 25 basis points was on expected lines, the Finance Minister, Mr Pranab Mukherjee said here on Thursday.
By this policy rate action, the RBI has sought to maintain an interest rate environment that moderates inflation and checks inflationary expectations, Mr Mukherjee said in a statement soon after the central bank announced its mid-quarter credit policy review.
The Finance Minister said that the further tightening of monetary policy was expected as the core inflation had hardened to 8.71 per cent in May 2011, from a level of 7.93 per cent in previous month. There was need to have better price stability for sustaining growth in the medium term, he said.
As part of anti-inflation measures, the RBI on Thursday announced a 25 basis points hike in repo rate from the existing 7.25 per cent to 7.50 per cent.
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