The Reserve Bank of India (RBI) governor Duvvuri Subbarao on Friday said he discussed the country?s macro-economic situation and inflation with finance minister Pranab Mukherjee, ahead of the RBI first quarter review of the monetary policy on July 27.
?Our policy review is scheduled for July 27. As is the standard practice, I?ve come to review the macroeconomic situation with the finance minister,? Subbarao said after meeting Mukherjee in North Block.
With inflation in double-digits for five months in a row, the central bank is widely expected to further raise its short term lending and borrowing (repo and reverse repo) rates in its upcoming monetary review.
?What we will do, you will get to know on July 27,? Subbarao said.
Wholesale price index based inflation has been over 10% for the last five months. The central bank has already raised its key policy rates by 25 basis points earlier this month to tame inflation. Earlier on Friday, Prime Minister?s economic advisory council (PMEAC) called for strong monetary policy action to combat high inflation.
Describing inflation as a source of major concern for quite some time, the EAC chairman C Rangarajan said inflation would start coming down only by August-September and stands at 7-8% in December, before declining to 6.5% by this fiscal end. ?A bias towards (monetary) tightening is necessary,? he said. If RBI does not take strong monetary action to contain inflation, it can opt for a series of ?baby steps? after July 27 monetary review, the EAC chief said. He said controlling high inflation is essential for sustainable growth in the medium term.
?Evidence on the funds flow side, as well as on the output side, clearly shows a strong economic recovery. In the backdrop of inflation rates that are more than twice the comfort zone, it is important that monetary policy completes the process of exit and move towards a bias on tightening,? Rangarajan said.