The surging global food and oil prices have already been factored in by the Reserve Bank of India (RBI) while reviewing its annual monetary policy for the third quarter in January-end, the central bank governor, YV Reddy told mediapersons on Friday.
Reddy has, however, expressed his concern over the uncertain global economic outlook. Speaking to reporters on the sidelines of a function held at the RBI office in the city, Reddy said that in some sense much of what is happening globally is not entirely unanticipated. The magnitude sometimes is difficult to guess. But, by and large, uncertainties are continuing, said Reddy. There is determination among US and other policymakers across the world to ensure an early end to the liquidity crisis there (US mainly).
?With the uncertainties around , one needs to necessarily have a wide corridor rates. The RBI policy has recognised that there could be pressure on the country?s economy due to surge in the prices of oil and food items.? To some extent, there is uncertainty in the domestic overnight rates, Reddy said . Again we have a repo as well as reverse repo rates. A massive inflow of foreign capital has a negative effect on the monetary system. Hence we have introduced the market stabilization scheme that aims at sharing the burden of capital inflows between government, RBI and the banks altogether. Cash reserve ratio was yet another tool which was available with RBI to control the inflows.
In another significant development in the Parliament on Friday,finance minister, P Chidambaram, while replying to a query in Lok Sabha held the high prices of primary food articles as the main cause for the rising inflation.
