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| CRR hike slightly aggressive, int rates not seen rising now |
| Press Trust of India / Mumbai Jan 29, 2010, 15:27 IST |
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Economists were "slightly surprised" by the extent of hike (75 basis points) in mandatory cash reserves of banks held by the Reserve Bank, but felt that the apex bank's move was strongly influenced by rising inflationary pressures.
"The market was expecting a 0.50 per cent hike in CRR -- I feel the 0.75 per cent is slightly aggressive. It is more a pre-emptive move to control inflationary expectations," Bank of Baroda's Chief Economist Rupa Rege-Nitsure said here.
"The move is targeted at combating the liquidity over-hang in the system," Nitsure said.
Crisil's Director and Principal Economist D K Joshi said, "Today's move is a clear enunciation that inflation has emerged as a major concern for the RBI. This is clear from the fact that the apex bank hiked CRR by 0.75 per cent instead of by the widely-expected 0.50 per cent."
While interest rate pressures are seen, there may not be an immediate increase in rates, economists said.
The Reserve Bank today upped the cash reserve ratio from 5 per cent to 5.75 per cent, a move expected to flush out Rs 36,000 crore from the system.
It also pegged expected inflation by end-March at 8.5 per cent, sharply up from its earlier projection of 6.5 per cent.
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