The Central Bank has reduced the Repurchase rate and the Reverse Repurchase rate from November 17. Accordingly, the Repurchase rate and the Reverse Repurchase rate of the Central Bank would be 7.50 per cent and 9.75 per cent, respectively.

Benign inflation has enabled the Central Bank to gradually relax its monetary policy stance on several occasions in order to support economic activity.

According to its Monetary Policy Review of this month Inflation has remained around 1 per cent thus far during the second half of the year. According to current projections, although inflation is expected to rise moderately in 2010 due to the gradual decline of the base effect of low inflation in 2009, it is expected to remain relatively subdued.

At the same time, the significant absorption of foreign exchange by the CB has led to a high level of excess rupee liquidity in the domestic market. With the retirement of a significant proportion of the Central Bank’s holdings of government securities in August 2009, the Central Bank has resorted to issuing Central Bank securities since October 2009 and foreign exchange SWAPs since November 2009 to absorb the excess rupee liquidity in the domestic market.

Through these measures, the Central Bank will continue to manage the excess liquidity situation in the domestic market and take appropriate measures to reduce the level of excess liquidity to a more desirable level.