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RBI Raises CRR To...

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It forecast economic growth of 8.0 to 8.5 percent in the fiscal year that began this month, after an estimated 8.7 percent in 2007/08, and aimed for inflation of "around 5.5 percent" this fiscal year but with the goal of lowering it close to 5.0 percent as soon as possible.

The RBI said managing liquidity would continue to receive priority in its policy objectives but warned it would act swiftly to curb any signs of "adverse developments" in inflation expectations.

The unexpected increase in the CRR , the amount of funds banks have to keep on deposit with the central bank, follows a surprise two-stage rise earlier in April to 8.0 percent. The second stage of that increase has still to take effect on May 10.

The RBI kept its key lending rate steady at 7.75 percent and left the reverse repo rate, the rate at which it absorbs excess cash from banks, unchanged at 6.0 percent. The bank rate, which is used to price medium-term and long-term loans, remained at 6.0 percent.

The decision comes as annual inflation holds above 7 percent, its highest in more than three years, due in part to rises in international food, oil and metal prices.

A slim majority of economists polled by Reuters last week had predicted no change in rates, including the CRR, but a substantial minority had expected one or more of the key interest rates to rise.


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