“For the next few quarters, we will be engaged in fighting inflation,” Rajan said on the sidelines of the SBI banking and economics conclave.
The governor said food prices have had an effect in the last couple of months and hoped that with appropriate food management, prices will come down. He said both the government and RBI are focused and vigilant on raising prices.
Besides he said the regulator also observing the evolving global economic conditions out of Iraq crisis, which may impact on the oil supplies and prices. This may even put India in a difficult spot in terms of foreign exchange reserves.
“Oil resources in Iraq are in the south, still not directly affected by the fighting. However, it is an issue we are watching,” said Rajan.
However, dismissing the possibility of a trouble, RBI governor said that external front India is positioned at better place than last year. The country maintains good forex reserves and comfortable CAD.
Although, CPI fell to 8.28 per cent in May, as against 8.59 per cent in April giving some relief, the WPI raised to 6.01 in May 2014.
In the June policy, RBI had kept the repo rate and cash reserve ratio (CRR) at 8 per cent and 4 per cent, respectively, and assured if inflation eases more than expected, there would be room for policy easing.
Later Rajan started preparing the industry and other stakeholders by presenting his views about the need to fight inflation and bring down CPI to 8 per cent. This may be the benchmark he put for easing policy rates.
