RBI to adjust rates in tune with price situation: Pranab

The Finance Minister, Mr Pranab Mukherjee, today indicated that the Reserve Bank of India will adjust policy rates in tune with the price situation.

“These are all weekly (inflation) figures. Monthly figure is yet to come. The RBI is watching the situation. As and when they will consider necessary, they will adjust the monetary policy. That is their job and they are doing it efficiently and effectively,” Mr Mukherjee told reporters here.

“I would not like to make any comment on that (rate revision) right now. Only point I shall have to emphasise on is that this declining trend we shall have to watch for a longer period of time, not on a weekly basis,” he said.

Meanwhile, the Minister of State for Finance, Mr Namo Narain Meena, in a written reply to the Lok Sabha, said, “In the forward guidance of the second quarter review of the Monetary Policy 2011-12, the RBI has reported that notwithstanding current rates of inflation persisting till November, the likelihood of a rate action in the December mid-quarter review is relatively low.”

“Beyond that, if the inflation trajectory conforms to projections, further rate hikes may not be warranted,” Mr Meena added.

Food inflation moderated considerably to 8 per cent during the third week of November from over 9 per cent in previous weeks.

General inflation also declined to 9.73 per cent in October.

In its mid-year credit policy review, the RBI had said that inflation, which was ruling near the double-digit mark, will start cooling by December this year and is likely to come down to 7 per cent by March, 2012.

In a bid to tame inflation, which has been above the 9 per cent-mark since December last year, the RBI has hiked interest rates 13 times since March 2010.

The RBI raised the repo rate by 25 basis points to 8.50 per cent and the reverse repo moved up by a similar percentage to 7.50 per cent in its last policy review in October. Repo is the short-term rate at which the RBI lends to banks, while reverse repo is the rate at which it gets funds from banks.

The central bank has hiked policy rates five times this fiscal. In the last one-and-a-half months alone, it has raised the key rate (repo) by 50 basis points.