A recent press release said that the Reserve Bank of India has expected that the monetary tightening together with reducing commodity prices would help the inflation rate to go down from December onwards touching 7 per cent by March end and might further moderate in the first half of 2012 – 2013. Though the growth risks are being recognized by the Central Bank high inflation seems to be the major macroeconomic concern.
In a statement the RBI said that when the inflation is far above the comfort level changing the policy stance would involve risks to the trustworthiness of the Central bank’s commitment to low and stable inflation. Yet the growth risks should be given major consideration as they seem to be much more important in this macroeconomic scenario.
The regulator has recently hiked key interest rates by 25 basis points, which is its 12th such hike since March, 2010. The hike which is aimed at controlling inflation has made auto, home and other loans more expensive.
Mr. Brinda Jagirdar, General Manager and Head of Economic Research of State Bank of India said that the past monetary policy tightening has shown a significant impact in slowing down the demand. Further the Agricultural sector is performing well to improve the supply of commodities and there has been the base effect. The cumulative impact of all these measures would certainly help in bringing down the inflation to 7 per cent.