Tuesday ‘shocker’ not end of RBI rate hikes, says Pranab
28 Jul 2011
On the heels of the Reserve Bank of India's unexpectedly high raise in interest rates on Tuesday, finance minister Pranab Mukherjee indicated yesterday that further rate hikes were likely to help curb the soaring inflation.
The sustained monetary tightening by India's central bank began more than a year ago; with Tuesday's 50 basis points (0.5 per cent) hike being among the single biggest doses.
"I don't think this is the end of the tunnel," Mukherjee told reporters in New Delhi when asked if he believed the monetary tightening was nearing an end. "We will continue to take monetary and fiscal steps to control inflation," he told reporters.
India's high inflation that is assuming chronic proportions now as food prices continue to rise while core inflation, which excludes food and oil, also shows a marked increase.
The Reserve Bank of India has raised interest rates 11 times since March 2010, but prices are showing little signs of easing.
Mukherjee said inflation was still "reasonably high" and food inflation of 8 per cent was unacceptable, although the central bank's rate increase sends a strong signal that will help cool expectations of price gains.
