repo reverse repo hiked 50 bps

In a bid to clamp down on resurgent inflation, the Reserve Bank of India, in its first monetary policy review of 2012, raised repo and reverse repo rates by 50 basis points, thus breaking its calibrated approach. This takes repo (rate at which it lends to banks) to 7.25% and reverse repo (rate at which it borrows) to 6.25%. However, the CRR has been left unchanged at 6%

The central bank in its annual policy on Tuesday said that over the long run, high inflation is inimical to sustained growth as it harms investment by creating uncertainty. "Current elevated rates of inflation pose significant risks to future growth. Bringing them down, therefore, even at the cost of some growth in the short-run, should take precedence," governor D Subbarao said.

The policy aims at maintaining an interest rate environment that moderates inflation and anchors inflation expectations. Second, it targets to foster an environment of price stability that is conducive to sustaining growth in the medium-term, coupled with financial stability. And, thirdly, to manage liquidity to ensure that it remains broadly in balance, with neither a large surplus-diluting monetary transmission nor a large deficit choking off fund flows.