RBI surprises, cuts CRR, repo rates by 25 bps today
"It is critical now to arrest the loss of growth momentum without endangering external stability," RBI said, adding that a rising current account deficit (CAD) could threaten macroeconomic stability and impact growth.
"Large fiscal deficits will accentuate the CAD risk, further crowd out private investment and stunt growth impulses," RBI said.
Yesterday, the RBI had left everyone guessing with a hawkish policy stance in the third quarter macroeconomic and monetary development report stating that sticky inflation and widening fiscal and current account deficits limited its scope for a rate cut.
Following are the highlights of the RBI's third quarter monetary policy review:
* Short-term lending rate or repo rate reduced by 0.25 pc to 7.75 pc, first time in nine months.
* Reverse repo rate stands adjusted to 6.75 pc.
* Reduces cash reserve ratio (CRR) by 0.25 pc to 4 pc.
* CRR cut to infuse Rs 18,000 crore in system from Feb 9
* RBI trims growth for fiscal 2012-13 to 5.5 pc from 5.8 pc.
* Policy action aimed at aiding growth by encouraging
investment and improving liquidity to support credit flow.
* Review intends to contain inflation and anchor inflation
* RBI says inflation has come off its peak.
* Revises downward March-end inflation projection to 6.8 pc
from 7.5 pc.
* Q3 CAD likely to widen beyond 5.4 pc of GDP.
* Bank rate stands adjusted to 8.75 per cent with immediate
* Next mid-quarter review of