We cannot be 'out of sync' with global rates: RBI

Justifying the recent hike in interest rates, the Reserve Bank of India (RBI) today said that interest rates were hardening globally and India cannot be "out of sync" with the monetary developments in the world.

"Several central banks have raised interest rates globally. Our monetary policy cannot be out of sync with the policies of major economies...We are now in sync with global policies," Y V Reddy, governor of RBI, said.

Global factors are now accorded greater weightage. "We wanted to put an end to uncertainty regarding the monetary policy, " Reddy said.

The RBI hiked repo and reverse repo rates by 0.25% each on Thursday in a bid to contain inflation but this move has triggered hike in interest rates by commercial banks particularly the home loan rates.

On the liquidity situation, he said there was a significant turnaround in the liquidity conditions. The reserve bank has hiked reverse repo rates by 0.25% twice so far this year to suck out excess liquidity in the market in a bid to check money supply thereby controlling prices.

The government's objective is to contain inflation within the projected 5 to 5.5% as given in RBI's annual policy statement.

"Our objective is to contain inflation within 5 to 5.5%...in the medium term we would like it to be below 5%," Reddy said.