Tone less hawkish

MONETARY POLICY: THE DAY AFTER

I believe the thrust this time is on liquidity management and monetary transmission, on the basis of the principle that efficacy of monetary policy is increasingly conditional on maintaining tight and stable inter-bank liquidity and appropriate management of "external" (current & capital a/c) liquidity flows.

Therefore, while the concern on inflation is still strong, the tone is less hawkish than expected and the attempt is to further ease capital account restrictions both as an administrative measure to counter sustained capital inflows, but also as a 'liberalisation' measure "" freer capital account convertibility.

The bank rate, reverse repo rate and repo rate have been kept unchanged. However, with headline and core inflation remaining above the target range, I do not rule out another 0.5 per cent point CRR hike by mid 2007- after the current hike takes effect on April 28.

Vishwavir Ahuja, MD & CEO, Bank of America, India