RBI should hike policy rates to ease inflation: ex-official

The Reserve Bank of India (RBI) should hike short-term rates in its policy review later this month in order to contain inflation, a former RBI official said today.

"The RBI should hike policy rates if they have to curtail inflation," K L Khetarpaul, former Executive Director of the RBI, said while releasing his book 'Indian Financial System- Evolution and Outlook' here.

The former RBI official stressed on the need for the central bank and the government to work together to contain price rise, especially food inflation.

He also said that the government needs to curtail the fiscal deficit and bridge the demand-supply gap to rein in price rise.

The RBI is widely expected to raise short-term lending and borrowing rates -- repo and reverse repo -- in its policy review on January 25 to ease inflation, particularly food inflation.

Food inflation moderated but was still at elevated level of over 16 per cent for the week ended January 1.

"Indian Financial System-Evolution and Outlook has been written with the intent to demystify the complexities prevalent in the financial system of India," Khetarpaul, who has served for more than 37 years at RBI, said.