The Reserve Bank of India may go in for further tightening of money supply as there is no likelihood of inflation coming to single digit in the next six months, according to indications given by the central bank governor to a parliamentary panel.
Some more monetary measures may be taken to contain the aggregate demand to counter inflation, RBI Governor Y V Reddy told members of the Parliamentary Standing Committee attached to the finance ministry earlier this week, sources said.
Sources said Reddy admitted that there will be no easing of inflation in the next six months. Rather it will now go over 12 per cent, the RBI Governor is understood to have said.
When some members asked why is inflation inching towards 12 per cent mark, while in countries like Britain it is below 4 per cent, Reddy replied that different countries have different yardsticks for measuring inflation.
According to sources, the Governor did not give any answer to a question by members that why are prices of vegetables rising when the Government says inflation is imported.
Last month, the central bank has raised short-term lending rates for banks-- repo-- by 0.75 per cent in two instalments, while also increasing mandatory cash deposits of banks by 0.50 per cent in two phases to suck out excess liquidity.
RBI is now slated to announce quarterly review of credit policy on July 29, when it may announce further measures to absorb money supply.
Inflation has been scaling new 13-year highs after the government's move to raise prices of petrol, diesel and LPG was reflected in the data. For the week ended June 28, inflation rose to 11.89 per cent.
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