In a far reaching decision RBI today hiked two key short-term rates to address the growing concern of high inflation.In the monetary policy unveiled by the apex bank today in Mumbai, the bank Governor D. Subbarao has hiked the repurchase rate by a quarter percent raising it to 5.75 percent and the reverse repurchase rate by half a percent, taking it to 4.50 percent. Other policy rates have been kept untouched by the Bank. This is the fourth such rate hike since the apex bank decided to tighten its monetary policy in January, first on Jan 29, followed by another on March 19 and again on July 2 to rein in inflation that stood at 10.55 percent for June. Repurchase rate, often referred to as the short term lending rate, is the interest the apex bank charges on borrowings by commercial banks. A hike in this rate increases the cost of borrowing for banks, discouraging them to hunt for more funds. Reverse repo rate, referred to as the short term borrowing rate, is the rate at which the central bank borrows money from commercial banks. This rate makes it more lucrative for banks to park funds with the central bank.Other highlights of the policy are: CRR and bank rate kept unchanged at 6 per cent, Hike in policy rates with immediate effect. Growth to be at 8.5 percent. Inflation pegged at 6 per cent by March end, to start a new mechanism of mid-quarter review.First such review on the 16th of September. Monsoon better than last year, good for agriculture production and capital inflows expected to be high on strong economic growth.Later talking to newspersons through video-conferencing, the RBI Governor said that the new policy is expected to moderate inflation by reining in demand pressures and inflationary expectations. He said it will also maintain financial conditions for sustained growth and generate liquidity conditions consistent with more effective transmissions of policy actions.The Finance Minister Mr. Pranab Mukherjee has said that the new monetary policy is expected to further ease inflation which is already going down. In a statement after the announcement of the new credit policy, Mr. Mukherjee said that it will also keep on track the growth process. While expressing happiness over the new policy, he said that the bank has not only raised policy rates but also narrowed down the spread between the repo and reversed repo rates. He said this has been done by raising the reverse repo rate by half a per cent and repo rate by a quarter per cent. Mr. Mukherjee asserted that this will lead to a more efficient financial system.