Some monetary tightening required to tame inflation: PMEAC

The Prime Minister's economic panel today said he favoured "some tightening" of money supply by RBI later this month in case the prices do not come down as inflation rose to higher than expected level of 8.43 per cent in December.

"The inflation rate for December has turned out to be much higher than what was originally expected... Given the present situation, perhaps some tightening on the part of the Reserve Bank may be required," Prime Minister's Economic Advisory Council Chairman C Rangarajan said.

The overall inflation for December, measured on the basis of wholesale prices, increased to 8.43 per cent in December, from 7.48 per cent in November.  

The Reserve Bank is widely expected to hike key policy rates by 25-50 basis points in its quarterly monetary policy review meeting on January 25. 

RBI raised key policy rates six times last year. But it paused its rate hiking spree in November review. 

Food inflation has remained high through December touching the year high level of 18.32 per cent. It finally eased somewhat for the week ended January 1 to 16.91 per cent.

"Unless there is some substantial decline in the food prices in the next two weeks, in my view, perhaps some tightening may be required," Rangarajan said.