Inflation Across Board Still Too High to Begin Easing: Rajan

Inflation Across Board Still Too High to Begin Easing: Rajan
File: PTI Photo by Shashank Parade
Inflation Across Board Still Too High to Begin Easing: Rajan

Stating that it is not just food prices that are persistently high but even those of other items which remain elevated, Reserve Bank Governor Raghuram Rajan today said prices across the board have to come down to enable him to reduce key rates.

"Inflation is high not only in food, but also in non-food items and the best solution for the country is to bring it down. Then I can cut interest rates," Rajan told bankers at a summit organised by industry body Ficci here.

"I have no desire to keep interest rates high for even a second longer. I want to bring down interest rates when it is feasible and that would be when we have won the fight against inflation," he said.

"There is no point in cutting interest rates to see inflation pick-up again," Rajan said, adding that right now he thinks the central bank is continuing the way it proposed recently.

Taking a dig at the industry for its persistent demand to cut lending rates even when there is a price increase in the sector, the Governor asked them to bring down prices.

"When you do that then we will do that, we have no problem. Clearly you will have no consensus on this," he said.

The August wholesale price inflation sharply declined to a near five-year low of 3.74 per cent on declining prices of vegetables and other food articles from 5.19 per cent in July and 6.99 per cent in August 2013.

However, the consumer price inflation which the RBI has adopted as a monetary policy gauge, still remains high. For August, it inched down marginally to 7.8 per cent from 7.96 per cent a month earlier.

The RBI is targeting retail inflation of eight per cent by January next year and six per cent by January 2016.

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