RBI raises repo rate by 25 bps, reverse repo by 50 bps

     The Reserve Bank of India (RBI) on Tuesday raised short term lending or repo rate by 0.25 percentage points. It will be now 5.75 per cent. The short-term borrowing or reverse repo rate has been hiked by 0.50 percentage point to 4.50 per cent. The cash reserve ratio or CRR and bank rate have been kept unchanged at six per cent. It also raised economic growth forecast to 8.5 per cent for 2010-11 fiscal from earlier eight per cent. Earlier, RBI had hiked repo and reverse repo rates by 0.25 percent as inflation remained above ten percent for the fifth month in succession. RBI's projection of a higher inflation than the earlier estimate could partly be attributed to the government's move of raising fuel prices. In June, the government raised petrol prices by Rs 3.5 a litre while decontrolling them and hiked diesel prices by Rs two a litre, LPG by Rs 35 a cylinder and kerosene by three a litre.

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