Indicating that more policy tightening measures will have to be undertaken, the Reserve Bank Deputy Governor, Mr Subir Gokarn, said today that headline inflation is not easing as fast as the apex bank would like it to do and that the upside risks still remain high.

“Inflation is not easing as we would like it to be...Upside risks to inflation are still high,” Mr Gokarn told presspersons here on the sidelines of a seminar on debt markets organised by the credit rating agency Care.

However, he said, the current skyrocketing prices of onions will only have a temporary impact on inflation. “I don’t think high onion prices will have a long-term impact on inflationary pressures, as the Government has said that it has been doing everything to manage supply side issues. Also, high food price inflation was driven more by the persistent rise in nutritional food items like cereals,” he said.

Mr Gokarn further pointed out that the rising commodity prices in the global markets also point to the rising risk of headline inflation.

The Reserve Bank at its mid-quarter review last week left the interest rates on hold but warned that the inflation was still well above its comfort level and unveiled steps to address the persistently tight liquidity by permanently bringing down the statutory liquidity ratio — a prudential measure that requires banks to invest a portion of their funds into government bonds, gold and other illiquid assets — by 100 basis points to 24 per cent, which would release Rs 48,000 crore into the system.

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