By maintaining a "status quo" on the policy rates, despite easing global monetary conditions, and raising the CRR, the RBI has chosen to respond to strong inflationary pressures.

While headline inflation has eased over the past few months, the fact that consumer price inflation is holding well above 6 per cent and commodity prices are rising indicators overall inflation scenario is not all that benign.

This 50 basis points hike in the CRR will reduce the banking system liquidity by about Rs 15,000 crore. Therefore we should see a stabilising upward pressure on rates and the rupee.