The Hindu : Business : RBI to tighten money supply further

Online edition of India's National Newspaper
Thursday, Jul 17, 2008
ePaper | Mobile/PDA Version

Business

Business

RBI to tighten money supply further

To announce quarterly review of credit policy on July 29

To release inflation data on Thursdays
Fitch had downgraded credit outlook

NEW DELHI: The Reserve Bank of India may go in for further tightening of money supply as there is no likelihood of inflation coming to single digit in the next six months, according to indications given by the central bank Governor to a parliamentary panel.

Some more monetary measures might be taken to contain the aggregate demand to counter inflation, RBI Governor Y. V. Reddy told members of the Parliamentary Standing Committee attached to the Finance Ministry earlier this week, sources said.

The sources said Dr. Reddy admitted that there would be no easing of inflation in the next six months. Rather it would now go over 12 per cent, the Governor is understood to have said.

When some members asked why inflation is inching towards the 12-per cent mark, while in countries like Britain it is below four per cent, Dr. Reddy replied that different countries have different yardsticks for measuring inflation.

Last month, the central bank has raised short-term lending rates for banks — repo — by 0.75 percentage point in two instalments, while increasing mandatory cash deposits of banks by 0.50 percentage point in two phases to suck out excess liquidity.

The RBI is now slated to announce quarterly review of credit policy on July 29, when it may announce further measures to absorb money supply.

Inflation worry

Inflation has been scaling to new 13-year highs after the government’s move to raise prices of petrol, diesel and LPG was reflected in the data. For the week ended June 28, inflation rose to 11.89 per cent.

The government would release official inflation data on Thursdays, against the usual practice of announcing it on Fridays. Meanwhile, the government has been drawing flak from both the Left and the right parties for its failure to tame price rise.

In the recent development, global rating agency Fitch while downgrading India’s domestic credit outlook to negative from stable, said inflation has continued to accelerate despite steps taken by the RBI to tighten monetary policy.

It added that with inflation nearing 12 per cent, there could be further tightening of monetary policy in the days to come. — PTI

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section