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Finance Minister P Chidambaram on Friday said the Reserve Bank of India (RBI)'s liquidity tightening steps to check rupee volatility would also help in moderating inflation.
"Liquidity tightening measures though aimed at check speculation in the currency market, would also have salutary impact of inflation moderation," he informed the Lok Sabha through a written reply.
With the increased pressure on rupee accompanied by volatility, RBI has taken various measures to tighten liquidity, like increase in the rate for Marginal Sanding Facility and making it mandatory for banks to have 99 per cent of the CRR on daily basis.
Inflation, based on the Wholesale Price Index, increased to a five-month high of 5.79 per cent in July.
