RBI dashes hopes of an easy money policy
16 Apr 2012
The Reserve Bank of India (RBI) has dismissed the likelihood any big reduction in policy rates, saying the upside risks of inflation still persisted.
In fact, the RBI said, it has now to calibrate monetary policy to a wage-cost inflation in the backdrop of rising wages in both in the rural and urban areas.
RBI said while growth is likely to improve moderately in 2012-13 with a moderation in inflation, monetary policy needs to support growth without inflation and external imbalances by excessively fuelling demand.
Inflation is likely to remain sticky at about current level during the year with the probability of further significant moderation being small, RBI said in an assessment of the macroeconomic environment.
Generalised price pressures softened as growth deceleration eased demand. The pricing power of companies has also waned with moderation in demand, it said.
However, the path of inflation in 2012-13 could remain sticky around current levels due to high oil prices, large suppressed inflation, exchange rate pass-through, impact of freight and tax hikes, wage pressure and structural impediments to supply response, RBI said.
