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Subbarao reiterates concern over inflation

Subbarao reiterates concern over inflation
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First Published: Mon, Jan 17 2011. 10 31 PM IST
Updated: Mon, Jan 17 2011. 10 31 PM IST
Mumbai: Reserve Bank of India (RBI) governor D. Subbarao on Monday reiterated his concern over inflation a week before the next monetary policy review, which is expected to feature further tightening measures.
“For the Reserve Bank, the challenge is to calibrate monetary policy, taking into account the demands of inflation management and the demand of supportive recovery,” Subbarao said, addressing students at the Indira Gandhi Institute of Development Research (IGIDR).
The apex bank is forecast to raise the key policy rates by at least 25 basis points at its 25 January review.
RBI raised the key rate six times in 2010 to 6.25% but that hasn’t succeeded in reining in food prices.
Inflation in the fastest growing economy after China accelerated to 8.43% in December, led by the rising cost of food, fuel and commodities.
“When I meet other central bankers, they tell me why don’t you give us a bit of your inflation so that our growth will be faster. That’s how desperately they want some inflation and how desperate we are to control our own inflation,” the governor said.
Subbarao said there was no template for monetary policy management or inflation management.
Noting that recovery across the globe has been broad-based, Subbarao said that “though we recovered faster from the (global financial) crisis, inflation also caught up with us sooner than others.”
Finance minister Pranab Mukherjee said last week that high food inflation was “unacceptable” and that the Union government was trying to control the price rise along with the states.
Mukherjee said he will meet state finance ministers on 19 January to discuss, among other issues, rising prices.
Banks have raised lending rates in the last quarter and at the start of the year by 0.25-0.50 percentage point, with a corresponding increase in deposit rates. At 9% on 1-2 year deposits, State Bank of India leads the pack with the highest deposit rates offered by any bank in that segment.
The bank’s prime lending rate, technically reserved for its best customers, stands at 12.75%, whereas its base rate, or the minimum lending rate, stands at 8%.
Anup Roy contributed to this story.
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First Published: Mon, Jan 17 2011. 10 31 PM IST