India's inflation 'continues to be above the acceptable level' and the global financial crisis has become more 'widespread' in the domestic economy despite global markets showing signs of recovery, the Reserve Bank of India (RBI) today said.
High inflation and moderation in the economic growth have made the monetary policy management more difficult for the policy makers, the RBI said.
"While inflation reached multi-year highs in the early part of the year and continues to be above the acceptable level, there has been moderation in the growth momentum of the economy. Consquently, the task of conduct of monetary policy has become more complex than before," RBI said in its report today.
The headline inflation rose close to 13 per cent early this year, which was followed by tight monetary policy actions by the Reserve Bank. The apex bank took a series of steps including sharp cuts in its policy rates.
It slashed the cash reserve ratio - the percentage of amount banks need to park with the central bank - to 5.5 per cent.
The apex bank also reduced the repo rate, at which it lends overnight funds to banks and reverse repo rate, at which it accepts deposits from banks, to 6.5 per cent and 5 per cent, respectively.
"Monetary measures were taken in an evironment of heightened uncertainity and supply constraints impacting the growth momentum in the domestic economy," the RBI said.