Credit Policy-CRR hiked by 50 bps to 7%

The key takeaways from the policy are:

• RBI hikes CRR by 50 bps to 7% from 6.5% from Aug 4
• RBI keeps all other key rates unchanged
• RBI removes Rs 3000 cr reverse cap from Aug 6
• GDP forecast for FY08 retained at 8.5%
• Has discontinued second auction of the day
• Hedge Funds pose significant risks to markets
• Financial stability added to monetary stance
• Emphasis on price stability, anchored inflation expectation
• Uncertainty over supply situation has increased
• Inflation pressures seen from liquidity, high credit
• Global inflationary pressures stronger than before
• Inflation threat from re-emergence of producers' price power
• Medium term target of inflation-4-4.5%
• FY08 target of inflation-5%

The Reserve Bank Governor Dr Yaga Venugopal Reddy announced a 50 bps hike in the CRR rates, raising it to 7% from 6.5% in his Credit Policy announcement today.

Other impacts could be deposit rates likely to come down and lending rate may remain same.

*moneycontrol.com