RBI may not cut interest rates in view of high inflation
The Reserve Bank on Monday indicated that it may not cut interest rates to boost growth in its month-end monetary policy review as inflation is still high.
Mumbai: Reserve Bank Governor D Subbarao said the inflation numbers on both the wholesale and retail front are way above the central bank's comfort level.
Subbarao said, "we are way above the threshold" and a level of around 5 percent on the headline inflation is the RBI's threshold.
His comments come ahead of the July 31 quarterly monetary policy. There is increased clamour for rate cuts by the industry as growth has slowed dowm.
Earlier in the day, data showed headline inflation slowing to a five-month low of 7.25 percent and consumer price index-based inflation hovering at 10.36 percent.
Defending the RBI's actions of continuous rate tightening in the past, Subbarao said the impact on growth has only been short-term and the RBI has been successful in trying to protect growth with price stability in the medium-term.
"I must hasten to add that sacrificing growth is only in the short-term. In the medium-term, there is no trade-off between growth and inflation," the RBI governor said.
"There is a threshold level of inflation. Below the threshold, may be, there is a trade-off between growth and inflation. But above the threshold, there is definitely no trade-off between growth and inflation," he said.
However, the RBI governor said his views on inflation should not be read as a preview to the decisions to be taken in the quarterly monetary policy review on July 31.
"What I do want to caution here is that I am not implying anything by way of what decision we might take at the policy review at the end of July. I am only saying that inflation is above the threshold," Subbarao said, while launching a book of unpublished essays by the late RBI governor IG Patel at the RBI headquarters.