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 per cent

* Raises repo rate (lending rate) by 25 bps to 7.50 per cent

* Reverse repo rises to 6.50 per cent.

* Cash reserve ratio (CRR) unchanged at 4.00 per cent

* Partially relaxes minimum daily cash balance requirement to 95 per cent of deposits from 99 per cent

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