New Delhi, June 15 (IANS) With India's annual inflation rate at double-digits, Finance Minister Pranab Mukherjee Tuesday said the central bank will take appropriate steps when required, raising expectations of an interest rate hike in the near term.
"As far as the monetary part is concerned, surely the reserve bank governor will look into it and consider it," Mukherjee told reporters on the sidelines of a conference with the chief commissioners and directors general of customs, central excise and service tax.
"As and when the Reserve Bank sees appropriate steps are required to be taken to control inflation, they will do so," the finance minister added, alluding that the central bank may not necessarily wait till the scheduled review of the monetary policy in July.
"Food inflation has started coming down a little bit, not fully. With the expectation of good monsoon and crop, I think moderating influence will be there from the middle of July onwards."
His remarks came a day after the official data on wholesale price index showed that the country's annual inflation rate for May had jumped to double digit at 10.16 percent in May from 9.59 percent in April, due mainly to higher food and fuel prices.
Data released by the commerce and industry ministry showed that prices of food articles rose 16.49 percent last month, against 16.87 percent in April, while that for fuels moved up 13.05 percent in the month under review.
Key policymakers admitted that inflation was getting broad-based, with a consensus emerging for the central to hike interest rates soon and not wait for the review of the its monetary policy stance in July.
"I think the picture is clear. Inflationary pressures are stronger," said C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council and a former governor of the central bank. "Some action will be called for by RBI in terms of policy tightening."
Chief Economic Advisor Kaushik Basu also said Monday that he saw the inflation rate moving up for a few months more, before tapering off.
"The inflation figure you are looking at may increase in the short-term. But six months down the line, you will see lower inflation due to lower fiscal deficit," said the former professor-turned-technocrat.