September 20, 2013 / 6:46 AM / 4 years ago

HIGHLIGHTS-India cbank surprises with repo rate hike

Sept 20 (Reuters) - Reserve Bank of India Governor Raghuram Rajan surprised
markets in his maiden policy review on Friday by raising interest rates to ward
off rising inflation while scaling back some emergency measures put in place to
support the rupee. 
    Following are highlights from the monetary policy statement:
        
    POLICY MEASURES       
    * Lowers marginal standing facility rate by 75 bps to 9.50 pct
    * Raises repo rate by 25 bps to 7.50 percent.
    * Reverse repo rises to 6.50 percent.
    * Cash reserve ratio unchanged at 4.00 percent 
    * Partially relaxes minimum daily cash balance requirement to 95 percent of
deposits from 99 percent.
 
    POLICY STANCE
    * Bringing down inflation to more tolerable levels warrants raising the repo
rate by 25 basis points immediately
    * To contemplate easing cash tightening measures in a calibrated manner
    * Policy steps to mitigate exchange market pressures, create a conducive
environment for revitalisation of sustainable growth
    * Steps intended to address inflationary pressures so as to provide a stable
nominal anchor for the economy
    
    FORECASTS
    * Timing, direction of further actions on exceptional measures will be
contingent upon exchange market stability, and can be two-way
    * Further actions need not be announced only on policy dates
    * Focus now on internal determinants of rupee, fiscal deficit and domestic
inflation, after steps taken to contain current account gap
    * Growth is trailing below potential and the output gap is widening
    * Growth could pick up in the second half of the year
    * Despite good monsoons leading to some moderation in CPI inflation, no room
for complacency
    * In the absence of an appropriate policy response, WPI inflation will be
higher than initially projected over the rest of the year
    * Further change in the minimum daily maintenance of the CRR not
contemplated
    * Objective to normalise conduct and operations of monetary policy so as to
allow the repo rate to resume its role as operational policy rate

    For online link to policy: (link.reuters.com/bat58r)

 (Compiled by Suvashree Dey Choudhury in Mumbai; Editing by Anand Basu)

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