'Lower inflation may lead to eased monetary policy'

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SME Times News Bureau | 02 Mar, 2012
Stating that he has kept inflationary expectations at six percent to seven percent in the coming months, union Finance Minister Pranab Mukherjee Saturday said current moderations in headline inflation have improved the prospect of Reserve Bank of India (RBI) easing monetary policy.

'Moderations in the core inflation rate in the past month have improved the prospects of reversal in the policy rates cycle and I am sure in the coming month, the Reserve Bank, in formulating the interest rates policy, will take into account the situation prevailing at that point of time,' Mukherjee said at an interactive session organised by the Calcutta Chamber of Commerce here.

Mukherjee said he has kept inflationary expectations at the level of six percent to seven percent.

'I have kept my inflationary expectations at the moderate level of six to seven percent... not below that. Because if I want to achieve that objective, it will accentuate further stagflation and the growth will be hampered,' he observed.

The country's inflation rate remained sticky in the double digits for several months last year.

The inflation rate fell to 6.55 percent in January 2012, compared to 7.47 percent in December 2011.

However, inflation rate in February has increased to 6.95 percent due to high oil prices.

The RBI has not cut its key policy rates for more than two years. In this period, the repo rate, at which banks borrow money from the apex, has gone up by 3.5 percent to 8.5 percent.