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RBI move in line with govt policy: to check inflation

New Delhi: Finance Minister Pranab Mukherjee on Tuesday said RBI`s policy initiatives, including hike in key rates, are in line with the government thinking and will help contain inflation, which shot up to 8.5 per cent in December.

"The policy announced by RBI is in conformity with thinking and policies pursued by the government and I welcome the announcement by the RBI Governor," Mukherjee told reporters here.

The central bank today hiked key short-term lending and borrowing rates by 25 basis points each to check inflation. The inflation for December rose to 8.43 per cent on rising prices of food items, from 7.48 per cent in the previous month.

In its third quarter monetary policy review, RBI projected 7 per cent inflation by the March-end, up from from its earlier estimate of 5.5 per cent.

"These steps RBI had to take to give a strong signal to tackle the inflationary pressure which is in the system…," Mukherjee said, adding there is a need remove supply bottlenecks and suck out excess liquidity.

The Reserve Bank of India (RBI) had hiked policy rates six times in 2010.

The central bank retained the cash reserve ratio, the percentage of deposits banks have to park with the RBI, at 6 per cent.

"CRR remains intact to ease the liquidity situation and make it more comfortable," Mukherjee said.

The RBI measures also include extending additional liquidity support facility till April 8, from January 28.

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