RBI governor hints at tough measures to check inflation

June 23rd, 2008 - 6:53 pm ICT by IANS  

A file-photo of Manmohan Singh

Pune, June 23 (IANS) Reserve Bank of India (RBI) Governor Y.V. Reddy Monday hinted at further tightening of monetary policies, saying the central bank would take “determined and calibrated measures” to rein in inflation. Speaking at the National Institute of Bank Management’s fifth convocation here, Reddy said the RBI was “currently in the midst of intensive examination of issues and options”.

The RBI would also hold consultations with the Technical Advisory Committee on Monetary Policy, he said.

Reddy said price pressures on account of rising international oil prices, which had sparked off India’s highest inflation in 13 years, were “not entirely unanticipated, but (that) they have been magnified in the WPI (wholesale price index) figures last Friday”.

However, irrespective of the soaring WPI, Reddy said the RBI would take “determined and calibrated measures, as and when warranted, with a focus on managing expectations and on enabling adjustments in the economy in response to the oil shock”.

The RBI governor called upon market participants, in particular those in the financial sector, to cooperate with the central bank in “in managing demand and maintaining orderly conditions in financial markets, while drawing upon the strengths of their respective balance sheets.”

In April, the apex bank had announced a hike of 25 basis points in the cash reserve ratio (CRR), on top of a hike of 50 basis points announced earlier.

Earlier this month, it announced a hike of 25 basis points in the repo rate.

“We will have to build on the actions already taken (to tame inflationary trends),” Reddy said.

Senior RBI officials will hold an internal assessment to chalk out measures, based suggestions made by Prime Minister Manmohan Singh and Finance Minister P. Chidambaram.

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