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Mid-Quarter Monetary Policy Review: December 2010

Summing Up

To sum up, the underlying growth momentum of the Indian economy remains strong. Even as inflation has moderated, it remains significantly above the comfort level of the Reserve Bank. Moreover, risks to inflation remain on the upside, both from domestic demand and higher global commodity prices. There is, therefore, a need for continued vigilance on the inflation front against the build-up of demand side pressures. A major challenge for the Reserve Bank in the recent period has been liquidity management. It is the Reserve Bank’s endeavour to alleviate the liquidity pressure in a manner consistent with the monetary policy stance of containing inflation and anchoring inflationary expectations.

Expected Outcomes

The policy actions in this Review are expected to:

release sizable primary liquidity into the system;

bring down the liquidity deficit in the system close to the comfort zone of the Reserve Bank; and

stabilise interest rates in the overnight inter-bank market closer to the operative policy rate of the Reserve Bank.

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RBI Further Relaxes Liquidity Easing Measures; 29 Nov 2010 ....Click Here

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