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Action will show impact on inflation in 6-12 months: RBI

Mumbai, Aug 12 (IANS) The Reserve Bank of India’s move on rates and liquidity to tame inflation will show its impact over the next 6 to 12 months, RBI Deputy Governor Subir Gokarn has said.

‘It is well-known that monetary policy acts with a lag. It could be anywhere between 6 and 12 months, even longer before demand side pressures abate in response to an action,’ Gokarn wrote in an article for the Yojana journal.

In a bid to control the spiralling inflation, the central bank has taken a series of measures since March, including hike in repo rate, reverse repo rate and cash reserve ratio.

The RBI has raised reverse repo rate by 125 basis points, and repo rate, cash reserve ratio and statutory liquidity ratio by 100 basis points each since March.

However, it has not showed the desired result and inflation remain in double-digits. Critics say the RBI’s approach has been ‘too little, too late’.

‘The policy approach over the past few months has been very conscious of the need to balance the exit from an abnormally high liquidity situation,’ said Gokarn.

— Indo-Asian News Service

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