RBI Indicates At Slowing The Pace Of Tightening (27-Aug-2010)
India’s central said on Friday that the monetary steps taken by it, coupled with the improving food supplies in wake of a good monsoon, were helping cool down inflationary pressures. The move comes amidst expectations that if the inflation does not come down rapidly, the Reserve Bank of India (RBI) will further hike policy rates in forthcoming mid-quarter review.
'Going forward, the Reserve Bank will calibrate policy action to the evolving growth-inflation dynamics,' he said in a speech delivered in Bangalore, India. Given the uncertainty in the global economy and the lags in transmission of monetary policy measures, it was not possible to offer more precise guidance, he added. His statement however did indicate that the pace of monetary policy tightening might get slower going forward.
The central bank had earlier hiked raised twice in July by 25 basis points each, amidst a persistently high inflation. The central bank has even faced criticism from some quarters that it was falling behind the curve in checking the inflation and was more focused on promoting growth. However, in recent months the RBI has picked up the pace of tightening which has also shown some impact in terms of decline in inflation.
As per the latest data released by the government, food inflation in the country eased to 10.05% in the week ended August 14 from 10.35% recorded in the week ended August 7. Food inflation has remained in double-digits for over a year now, but has been on a downward journey for last few weeks. Food inflation this time around a year ago was as high as 13.45%. Further, the headline inflation, which includes the manufacturing inflation that RBI watches closely, eased to single digit in July for the first time in six months.
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