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2011-07-28

RBI might hike rates again

RBI might hike rates again

Finance Minister Pranab Mukherjee said on Wednesday that the Reserve Bank of India might hike policy rates again as inflation was unlikely to come down to a comfortable level this year.

"I don't think this is the end of the tunnel," Mukherjee told reporters when asked whether the Reserve Bank of India (RBI) would raise policy rates again.

The finance minister termed the RBI action necessary, even though he admitted that such hikes were hurting growth.

The RBI raised key policy rates by 50 basis points in the 11th such exercise since January 2010 to tame inflation. The repurchase rate, the interest the country's Central Bank levies on short-term borrowing by commercial banks, has been hiked to 8 percent from 7.5 percent and reverse repurchase rate, or interest paid on short-term lending, raised to 7 percent from 6.5 percent.

Mukherjee said 50 basis points rate hike was intended to convey a "strong signal" about the regulator's intention to curb inflation.

The headline inflation based on wholesale prices was 9.44 percent in June. It was almost in the double-digit for most part of the last fiscal and stood in the range of 9 to 10 percent in the first three months of 2011-12 against the regulator's comfort level of 4 to 5 percent.

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