RBI monetary policy review: Retail inflation to remain above 9 pct

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Retail inflation measured by the consumer price index (CPI) has risen sharply: RBI monetary policy review. RBI Governor Raghuram Rajan before the announcement of monetary policy in Mumbai on Tuesday. PTI Retail inflation measured by the consumer price index (CPI) has risen sharply: RBI monetary policy review. RBI Governor Raghuram Rajan before the announcement of monetary policy in Mumbai on Tuesday. PTI
SummaryCommon man is unlikely to get relief from rising prices in months ahead, says RBI in its monetary policy review.

The common man is unlikely to get relief from rising prices in the months ahead, with the RBI today saying retail inflation will remain above 9 per cent during the course of this financial year.

Retail inflation measured by the consumer price index (CPI) has risen sharply across food and non-food constituents, including services, keeping inflation expectations high, the Reserve Bank of India said in its Second Quarter Review of Monetary Policy 2013-14.

"Notwithstanding the expected edging down of food inflation, retail inflation is likely to remain around or even above 9 per cent in the months ahead, absent policy action," the central bank said.

RBI Governor Raghuram Rajan pitched for an appropriate policy response to tame wholesale as well as retail inflation.

"Overall WPI inflation is expected to remain higher than current levels through most of the remaining part of the year warranting an appropriate policy response," Rajan said in the monetary policy review.

Inflation as measured by the wholesale price index (WPI) accelerated in September for the fourth month in a row to 6.46 per cent. Retail inflation rose marginally to 9.84 per cent in September, mainly due to a hike in food prices, particularly of vegetables.

The RBI said food price pressures may ease with the arrival of the kharif harvest and seasonal moderation. Food inflation in the WPI basket stood at 18.40 per cent in September.

The RBI today hiked the lending (repo) rate by 0.25 per cent to 7.75 per cent, saying it was important to break the spiral of rising price pressures in order to curb the erosion of financial saving and strengthen the foundations of growth.

The policy stance, the central bank said, "is intended to curb mounting inflationary pressures and manage inflation expectations in a situation of weak growth."

The RBI said it plans to introduce inflation-indexed National Saving Securities for retail investors in November or December in consultation with the government.

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