RBI plans 'apt' response to inflation

India's central bank will announce measures to curb inflation, which has reached a three-year high, Deputy Governor Rakesh Mohan said.

"An apt and detailed response will be available in the annual policy," Mohan said while responding to questions on inflation. "We are constantly reviewing and analysing global and domestic developments as these are important."

The Reserve Bank of India (RBI) is scheduled to hold its annual monetary policy meeting on April 29.

Wholesale price gains in Asia's third-largest economy accelerated to 7 per cent in the week ended March 22, the fastest since December 2004, and look set to breach the 5 per cent target forecast by the central bank for the financial year ended March 31.

Governor YV Reddy has raised the central bank's key policy rates nine times since October 2004 and the cash reserve ratio, or the proportion of deposits that commercial banks need to place with the central bank, five times since December 2006 to douse inflationary pressures.

The RBI has enough tools to prevent surplus cash in the banking system from stoking inflation, Mohan said.

"We monitor and do active liquidity management on a day-to-day basis," he said. "Whether it's on the absorption side or injection side, our job is to do liquidity management."

The government sold Rs 40 billion of treasury bills meant to drain surplus cash today.

It will sell Rs 50 billion of bonds maturing in 2011 to drain cash tomorrow.