Money & Banking

Unsure of impact, yet RBI may up key rates

Our Bureau Mumbai | Updated on November 09, 2017 Published on January 24, 2011


Lobbing the ball in the Government's court, the Reserve Bank of India on Monday said the inflationary pressures emanating from rising crude oil and metal prices and the demand-supply imbalances in some food items would be non-responsive to monetary policy actions.

However, the RBI said since persistent high inflation could endanger the growth objective, containing inflation will have to remain the predominant objective of monetary policy in the near-term.

What this means is that the RBI could up key short-term rates by 25-50 basis points in the third quarter monetary policy review on Tuesday to stem inflationary pressures (the wholesale price index based inflation rose to 8.4 per cent in December from 7.5 per cent in November) even as it draws comfort from various forward looking surveys which point to robust growth momentum.

“Food inflation in particular has remained stubbornly in double digits for over two years now, which has welfare costs…..The upside risks to inflation, particularly from the impact of supply rigidities and hardening commodity prices have increased, which could dampen the expected impact of monetary policy to some extent. Policy response ahead has to recognise these risks,” said the RBI in its third quarter review of the macroeconomic and monetary policy developments.

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Published on January 24, 2011
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