Wednesday, June 16, 2010

PM’s economic advisor says rate hike ‘imperative’

The chairman of Prime Minister’s Economic Advisory Council, C Rangarajan, on Thursday said that a rate hike from the RBI has become imperative as overall inflation has soared to double digits.

Headline inflation surged to 10.16 per cent in May over last year as inflation spread from food and fuel items to the manufacturing sectors, adding weight to the possibility that the RBI could hike interest rates before its scheduled policy review in end-July.

“It is not just high food prices fuelling the inflation. Manufacturing sector inflation has gone over 6 per cent, making the rate hike imperative,” Rangarajan said. "The overall inflation has been in double digits for a few months."

The annual food inflation eased in the week ended June 5, at to 16.12 per cent, but still remained at an elevated level.

KC Chakrabarty, RBI’s deputy governor, said that inflation control remains a top priority for the central bank despite some weakness in the external sector, particularly in the Eurozone.

The deputy governor said that the central bank was moving toward a tightening policy regime but did not comment on the timing of the rate hike.

Separately, Chakrabarty said that he is in favour of deregulating all interest rates.

Source http://beta.profit.ndtv.com/news/show/pms-economic-advisor-says-rate-hike-imperative-75388

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