Inflation limits RBI moderation: PMEAC
The rise in April inflation at 7.23 per cent will make it difficult for the Reserve Bank to moderate its monetary policy, the key advisor to the Prime Minister said today.
"The inflation numbers are a very uncomfortable statistics. Many people have been calling for an easing in monetary policy, but the recent rise in inflation makes it difficult for RBI to moderate policy," Prime Minister's Economic Advisory Council Chairman C Rangarajan told reporters.
The WPI inflation in April accelerated to 7.23 per cent as pressure on prices of food, fuel and manufactured items rose. The inflation in March was 6.89 per cent.
Rangarajan said there is a need for policy action to control inflation as high rate of price is unacceptable.
"The need to tackle inflation and to bring it down becomes critically important and therefore the policies have to be designed in such a way that the inflation is brought down. Policy must address in an adequate fashion to control inflation," he said.
Reserve Bank had hiked policy rates 13 times between March 2010 and October 2011 to combat inflation, which has remained close to double digits for most part of 2011.
However, with GDP growth slowing to a three-year low of 6.9 per cent, and RBI had eased its policy and lowered interest rates by 50 basis points in its April 17 policy review. The apex bank had, however, said the scope for reduction in policy rates in future was limited.
"The scope for action on the part of RBI gets narrowed when inflation is rising. The possibility of lowering interest rate will come only when inflation rate comes down," Rangarajan said.
He said a decline in non-food manufacturing inflation would give greater manoeuvrability to the RBI to act on the policy rate.