credit policy review of RBI

The RBI has increased repo and reverse repo by 25 bps to 5.5% and 6.5% respectively in its first monetary policy review of 2011 and left the CRR unchanged. Driven by primary food inflation and with a revised 7% inflation, the RBI has been less than hawkish primarily because the current account deficit rules at 3.5% of GDP.  It may however be remembered that the policy rates have already been hiked by about 3% over the last one year period, but in a growing economy further hikes in the policy rates cannot be ruled out.