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No sign of moderation in the inflation for RBI to change monetary policy stance: Rangarajan

15 Oct 2011 Evaluate
Commenting on the latest headline inflation data, the Prime Minister’s Economic Advisory Council (PMEAC) chairman, C. Rangarajan said that there is no sign of moderation in the rate of price rise to prompt the Reserve Bank to change its policy of monetary tightening.   

C. Rangarajan said “It is not a very comfortable situation. For the monetary policy stance to change, inflation has to come down and show signs of definite decline. But that kind of an indication has not come...,”

The headline inflation, measured by Wholesale Price Index (WPI) stood at 9.72% in September which marginally eased compare to 9.78% in August. From last ten months the headline inflation has been hovering above 9%, which is almost double the comfort zone of Reserve Bank of India (RBI).

This hovering inflation has made strong case for another hike by the RBI, which is scheduled to take review of monetary policy on October 25. To curb inflation, in last 18 months, the RBI has increased its short term lending and borrowing rates by 12 times.

Earlier this week, the RBI Governor, Dr D. Subbarao, said the rate hikes have affected industrial activities, but asserted that inflation continues to remain above the comfort level of around 5%. By adding further he said, interest rates would come down only if inflation eased.

Meanwhile, the PMEAC, in its Economic Outlook for 2011-12, had said that inflation is likely to remain elevated till the third quarter of the fiscal because of high prices globally.

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