The Prime Minister’s Economic Advisory Council (PMEAC) Chairman, Mr C Rangarajan, on Saturday said the Reserve Bank may consider reversing its tight monetary stance once inflation starts softening.
“I hope that by December-January, inflation would break and around that time perhaps a reversal (monetary) policy is possible which would keep deficit near budget levels,” Mr Rangarajan told reporters on the sidelines of ‘Bancon 2011’, organised by Indian Banks’ Association and Indian Overseas Bank here.
The overall inflation may remain high for next one-two months after which it is expected to slowdown to around 7 per cent by the end of the current fiscal, he said. “As the inflation rate shows definite signs of decline, the policy regime (will) also have to change,” he added.
The Reserve Bank, in its mid-year review of the credit policy last month, indicated that it may not increase the lending rate at its next review in December. In its efforts to rein in inflation, RBI has raised interest rates 13 times since March, 2010.
Food inflation soared to 12.27 per cent for the week ended October 22, while the headline inflation in September stood at 9.27 per cent.
“Though inflation rates were mainly influenced by foodgrains and vegetable prices, it has now become generalised and spread even to manufacturing sector which has recorded at 7.4 per cent,” Mr Rangarajan said.