Aggressive monetary policy is the need of the hour if inflation is to be brought under control, a senior official in the Reserve Bank of India (RBI) was quoted as saying on Thursday.
"Monetary policy has to be aggressive," the official told reporters after a meeting with senior finance ministry officials. "Rates should have risen much higher by now," he added.
His comments sent bond yields to the highest level in almost three months. The remarks by the RBI honcho came just two days after the central bank increased its benchmark short-term rates for the fourth time this year.
India's wholesale price based inflation rate has stayed above 10% since February and it is expected to accelerate following the June 25 fuel-price increase. Wholesale price inflation, the most widely watched measure of prices, was at 10.55% in June.
Monsoon rains could moderate food prices in the coming months, the official said.
The RBI on July 27 raised the reverse repurchase rate by half a percentage point to 4.5% and the repurchase rate to 5.75% from 5.5%. It also lifted the inflation projections for the current fiscal year to 6%.
India’s food inflation slowed for a second week, a government report showed today but fuel inflation rose slightly.
The food price index rose an annual 9.67% in the week to July 17, compared with the previous week's increase of 12.47%. The fuel price index rose 14.29% in the period, as against a 14.27% in the previous week.
The primary articles index rose 14.50% compared with the week-ago reading of 16.48%.
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