Interest rates unlikely to rise in short term: Montek

“I am sure the interest rates will not rise,if you are referring to the adjustments of the short-term rates like the repo rate by the RBI (Reserve Bank of India),” he said.

The repo rate is the rate at which the RBI lends to banks.

Several central banks in Asia,including those in Malaysia,Singapore and China,have started tightening monetary policy as the region recovers from the global downturn faster than the rest of the world. However,inflation has taken off in India more than elsewhere.

Much of the country’s inflationary pressures were initially on the supply-side as a result of the 2009 monsoon failure that pushed up food prices.

But RBI Governor Duvvuri Subbarao said on Monday rising prices for food,fuel and wages are making inflation a generalised and demand-side problem.

“I am concerned that it (inflation) is too high for comfort right now,” Ahluwalia said,adding he expected food prices to ease in the next two to three months.

“This season very good harvest (wheat) is coming in. There is ample stock of foodgrain in the country. So the inflation psychology would be broken,” Ahluwalia said.

The wholesale price index (WPI) is currently nearing the double-digit mark,with the March-end figures at 9.90 per cent,much higher than the RBI estimates of 8.5 per cent.

“I am concerned about the current inflation (WPI). It is too high for comfort right now,” he said. “In next 2-3 months we will see decline in inflation.”

Last week,the central bank raised its key interest rates by 25 basis points to 5.25 per cent and 3.75 per cent respectively. It also increased bank reserve requirements to 6 per cent from 5.75 per cent.

A poll conducted after last week’s policy review found a small majority of economists expected another increase in rates by end-June,which would be before the RBI’s next scheduled quarterly review in July.