Mid-term Credit Policy for Jan08

RBI Governor presents Third Quarter Review of Annual Statement on Monetary Policy for 2007-08 on 29th Jan 2008

HIGHLIGHTS

• Bank Rate, Repo Rate and Reverse Repo Rate kept unchanged.
  
  
• The flexibility to conduct overnight repo or longer term repo including the right to accept or reject tender(s) under the LAF, wholly or partially, is retained.
  
  
• Overall real GDP growth projection for 2007-08 at around 8.5 per cent is retained.
  
  
• The policy endeavour would be to contain inflation close to 5.0 per cent in 2007-08 while conditioning expectations in the range of 4.0-4.5 per cent.
  
  
• While non-food credit has decelerated, growth in money supply and aggregate deposits of scheduled commercial banks continue to expand well above indicative projections.
  
  
• High growth in reserve money is driven by large accretion to RBI's net foreign exchange assets.
  
  
• Liquidity management will assume priority in the conduct of monetary policy through appropriate and timely action.
  
  
• Barring the emergence of any adverse and unexpected developments in various sectors of the economy and keeping in view the current assessment of the economy including the outlook for growth and inflation, the overall stance of monetary policy in the period ahead will broadly continue to be:
  
     o To reinforce the emphasis on price stability and well-anchored inflation expectations while ensuring a monetary and interest rate environment conducive to continuation of the growth momentum and orderly conditions in financial markets.
  
     o To emphasise credit quality as well as credit delivery, in particular, for employment-intensive sectors, while pursuing financial inclusion.
  
  
• To monitor the evolving heightened global uncertainties and domestic situation impinging on inflation expectations, financial stability and growth momentum in order to respond swiftly with both conventional and unconventional measures, as appropriate.