RBI's tough stance may stay: Rangarajan

The Reserve Bank of India is likely to continue with its tight monetary stance to counter the surge in headline inflation rate, C Rangarajan (pictured), chairman, Prime Minister’s Economic Advisory Council, said today. “Unless there is a significant change in the price situation, the present monetary stance of RBI will continue,” Rangarajan told reporters on the sidelines of a function.

The inflation rate, as measured by the wholesale price index, rose to a fresh 13-year-high of 11.98 per cent for week ended July 19. Inflation has been hovering at around 11.9 per cent since the week ended June 28 mainly on account of a spurt in the prices of petroleum products, edible oils, iron ore and steel. The government and the central bank have announced a series of financial, administrative and monetary steps to tame the inflation pressure.

The RBI, in its quarterly review of monetary policy last week raised the repo rate by 50 basis points to 9 per cent and cash reserve ratio by 25 basis points to 9 per cent. RBI Governor YV Reddy has maintained inflation control topped the central bank’s priority. Rangarajan said inflation rate is likely to moderate to 8-9 per cent by March—way higher than the central bank’s revised forecast of close to 7 per cent.