RBI rate move step in the right direction: FM

RBI rate move step in the right direction: FM

New Delhi: The Reserve Bank of India (RBI) move to hike policy rates is a step in the right direction, finance minister Pranab Mukherjee said on Thursday, after the central bank raised its key rates in its first mid-quarter policy review.

But, inflationary pressures remain, he added.

The central bank raised interest rates for the fifth time this year as it looks to tame inflation, running above its 6% target by end-March 2011, in the fast-growing economy.

The RBI raised its repo rate, the rate at which it lends to banks, by 25 basis points to 6% and the reverse repo rate, at which it borrows from banks, by 50 basis points to 5%.

India’s annual headline inflation, with a revised base year of 2004/05 from 1993/94, eased in August to 8.5%. Under the old series, inflation stood at 9.5%, a touch higher than a 9.6% rise forecast in a Reuters poll.