RBI will take anti-inflation steps when needed: Reddy

The Reserve Bank of India on Monday sent strong signals that it is completely ready to take appropriate measures to control inflation as and when it is needed.

The Reserve Bank of India on Monday sent strong signals that it is completely ready to take appropriate measures to control inflation as and when it is needed. 8220;Inflation is unacceptably high. We had expected some inflationary pressures even before we announced the Monetary Policy but it has turned out to be more than anticipated,8221; Reserve Bank of India governor Y V Reddy said on Monday.

He said that the high inflation index is a result of large increase in food, fuel and metal prices and also the delay in adjustment of oil and steel prices. However, he allayed fears of a further spurt, saying that the government is taking several supply-side initiatives. Reddy said that the increase in global price levels have been more sharp than that in India.

Expressing his concern over hike in prices, he said, 8220;We have to make sure that aggregate demand is consistent with supply side initiatives.8221; He said that the central bank is confident that in terms of both growth and stability India will lead the global economy.

8220;There are a range of instruments available to manage liquidity,8221; Reddy said, explaining that excess cash in the economy will not be a problem for the bank to counter. Reddy was speaking at the Yashwant Chavan memorial lecture organised by the Indian Institute of Public Administration in Mumbai.

In his speech, he explained the constitution, functioning and independence of the bank. Referring to the statute to the formation of RBI he said that there was 8220;no mandate on price stability or inflation8221;, when the bank initially came into being. However, with time it became one of the important responsibilities of the bank, he added. Reddy added that the RBI did not anticipate any systemic problems from exposure to forex derivatives by banks.