Food inflation a dominant policy concern: RBI

Containing high food prices is a dominant policy concern, the Reserve Bank said today, amid expectations that it may raise short-term borrowing and lending rates next month.

"The dominant concern from the last few months is food prices. It is still a central factor in macro economic. And it has created a huge challenge in terms of the impact of monetary action on control of inflation," RBI Deputy Governor Subir Gokarn said at a statistical conference here.

He said that food prices are not high just because of weak monsoon and poor rainfall, and they acted as mere triggers.

"There is a need to understand what is driving food prices. This is an analytical issue. The dynamics of food prices is not the result of one failed monsoon. It is just a triggering factor," Gokarn said.

The RBI deputy governor attributed rising prices also to a changed basket of food consumption by Indians.

"There is a diversification in household consumption pattern," Gokarn said.

It is widely expected that the RBI may raise short-term lending and borrowing rates at its monetary review on July 27.

Yesterday, Finance Minister Pranab Mukherjee had said that the decision on policy rates is a prerogative of the RBI and it would consider all relevant factors in its policy towards the end of July.

Food inflation stood at 16.90 per cent for the week ended June 12 and may rise further due to the cascading effect of the fuel price hike.