Finance Minister P Chidambaram on Tuesday said that the 0.25 per cent hike in repo rates by the Reserve Bank of India was "pre-emptive action," and if the external situation improved they could be reversed.
"The 25 basis points hike in repo rates, I believe is a pre-emptive action by RBI which wants to be ahead of the curve (in keeping inflation under check). As soon as external situation clears and stabilises, I believe it could be reversed," he told reporters reacting to the central bank's third quarter review of the monetary policy.
He said the government and RBI was keen to keep the inflation below five per cent and given the strong credit and consumer demand, "we do not want to stoke inflationary expectations."
Chidambaram also expected the interest rates to be stable in the medium and long term.