The Reserve Bank of India will take all possible monetary measures to maintain price stability, deputy governor Rakesh Mohan said on Wednesday.
He said the RBI would focus on liquidity management, saying a reasonable amount of sterilisation of excess cash was needed to achieve desired monetary growth.
"Maintenance of macroeconomic stability and financial stability is important to us," Mohan told an investor seminar.
"We will take all possible monetary actions to maintain price stability and will respond swiftly to bring inflation down."
Inflation, as measured by wholesale prices, touched a two-year high of 6.73 per cent in early February but has since slowed to an annual 6.10 per cent, although it is still well above the central bank's projection of 5.0-5.5 per cent.
India's economy is estimated to grow at 9.2 per cent this fiscal year to March 31, its fastest pace in nearly two decades, and this has attracted foreign investment into the stock market.
The inflows have pushed up the rupee against the dollar, causing a headache for the central bank which has been intervening to keep it down by selling rupees.
Data this week showed the central bank bought nearly $8 billion in the three months ended January. The rupees its sells during intervention add to money supply, which has been growing at annual rates of around 20 per cent.
To prevent the excess cash finding its way into commercial and consumer lending, the central bank has resumed sales of market stabilisation bonds after a gap of more than 18 months as a way to absorb the funds.
"With this kind of buoyant growth and expectations of growth the flow of capital has increased tremendously and therefore there has to be a reasonable degree of sterilisation in order to maintain the monetary growth that we would like to have," Mohan said.
Courtesy : Expressindia.com
He said the RBI would focus on liquidity management, saying a reasonable amount of sterilisation of excess cash was needed to achieve desired monetary growth.
"Maintenance of macroeconomic stability and financial stability is important to us," Mohan told an investor seminar.
"We will take all possible monetary actions to maintain price stability and will respond swiftly to bring inflation down."
Inflation, as measured by wholesale prices, touched a two-year high of 6.73 per cent in early February but has since slowed to an annual 6.10 per cent, although it is still well above the central bank's projection of 5.0-5.5 per cent.
India's economy is estimated to grow at 9.2 per cent this fiscal year to March 31, its fastest pace in nearly two decades, and this has attracted foreign investment into the stock market.
The inflows have pushed up the rupee against the dollar, causing a headache for the central bank which has been intervening to keep it down by selling rupees.
Data this week showed the central bank bought nearly $8 billion in the three months ended January. The rupees its sells during intervention add to money supply, which has been growing at annual rates of around 20 per cent.
To prevent the excess cash finding its way into commercial and consumer lending, the central bank has resumed sales of market stabilisation bonds after a gap of more than 18 months as a way to absorb the funds.
"With this kind of buoyant growth and expectations of growth the flow of capital has increased tremendously and therefore there has to be a reasonable degree of sterilisation in order to maintain the monetary growth that we would like to have," Mohan said.
Courtesy : Expressindia.com