Inflation well above comfort zone, says Gokarn

Inflation well above comfort zone, says Gokarn

Mumbai: Reserve Bank of India (RBI) Deputy Governor, Subir Gokarn, on Tuesday said that despite a decline in the rate of price rise in recent months, the current inflation situation is “well above the comfort zone."

“The current inflation scenario is a cause of concern as the inflation rate persists well above the upper bound of the comfort zone," Gokarn said in an address at the Private Equity International India Forum here.

However, there are “distinct signs" of a deceleration in inflation in the last two months, the RBI Deputy Governor said, adding inflation rate responds to monetary policy interventions with a lag of six-months.

RBI’s monetary policy stance of seeking a balance between growth and reining-in inflation, adopted post-slowdown in October 2009 when the recovery started in the Indian economy, has been working well and the Indian economy is poised to grow at a healthy rate this year, he said.

Inflation rate softened at 8.5% for the month of August and the RBI has hiked its key rates five times this year.

In the last review on 16 September, it raised the repo—the rate at which it lends to banks—by 0.25% to 6% while reverse repo—the rate at which it borrows from banks—was increased by 0.50% to 5%.

Gokarn termed the “drastic action" by RBI as an “unavoidable consequence" of runaway inflation.