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Double-digit inflation is a worry but not surprising: RBI

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Press Trust of India Mumbai

The RBI today said that high inflation is a cause of worry for the central bank and it is willing to take policy actions as per the changing economic environment.

"Double-digit inflation is a cause of worry more than the external factors...It is not out of our estimates. If things change fast, there will be more measures depending upon the environment...

"The message is already there that we are moving from the accommodative policy. I cannot say when this will happen," RBI Deputy Governor K C Chakrabarty told reporters on the sidelines of a seminar here.

Wholesale prices based inflation provisionally rose to 10.16 per cent in May, entering double digits for the first time in nearly 20 months, and put pressure on the central bank to hike its policy rates.

 

Earlier this week, Finance Minister Pranab Mukherjee said food inflation -- which is fuelling overall inflation -- has started coming down a little bit and expected it to ease with a good monsoon and crop.

Food inflation stood at 16.12 per cent as of June 5.

"So far as the monetary part is concerned, the Reserve Bank will look into it, will consider it," Mukherjee had said, indicating that RBI may tighten money supply even before its scheduled July 27 review of the monetary policy.

The Central Bank has already twice this year raised key policy rates to check food inflation from spreading to manufactured goods.

Asked whether the European financial crisis will weigh on RBI's policy decisions, Chakrabarty said while external shocks can claim some adverse impact on the economy, the RBI is more focused on containing high inflation in the economy.

"International situation is not that volatile. Something has happened in Europe, it has not happened in US. It has some adverse implications. But I think more than that the domestic inflation will definitely be a matter of worry," Chakrabarty said.

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First Published: Jun 17 2010 | 1:23 PM IST

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