RBI to step in if inflation continue to surge: Chakrabarty

The Reserve Bank of India (RBI) today hinted that it would further tighten money supply to control inflation, which touched a 19-month high of 10.16 per cent in May.

"Inflation will definitely come down...If it does not come down, definitely Reserve Bank will act," RBI Deputy Governor K C Chakrabarty told reporters on the sidelines of a bankers' conference here.

RBI has already raised key rates twice this year to curb money supply, as part of efforts to check food inflation from spreading to manufactured goods.

On the possibility of raising the key policy rates and ratios before the scheduled date of monetary policy review on July 27, he said, "Possibility is always 50-50. If need be, anything can be done."

Annual inflation, measured by movement of the wholesale prices, rose to 10.16 per cent in May, as per the provisional figures released today. The final figures for March too stood revised at 11.04 per cent from 9.90 per cent reported earlier.

The inflation, Chakrabarty hoped, would start easing in the next one or two months.

Inflation is fueled by high food prices and is expected to ease if the monsoon, which accounts for 80 per cent of rains India receives, turns out to be normal.

Though the RBI is slated to review its monetary stance on July 27, it may step in earlier in view of the soaring prices, which are hurting the common man.

The apex bank began unwinding its monetary stimulus by upping the requirements for banks to keep cash with it (CRR) by 0.75 percentage points in January and short-term lending and borrowing (repo and reverse repo) rates by 0.25 percentage points.

In its annual monetary policy in April this year, the RBI hiked key short term rates and the CRR by 25 basis points each.