Pricey food, crude oil may have caused inflation in past two years
MDT/PTI 26 June 2012

The evidence for both India and other countries suggests that the impact of monetary policy actions on inflation is modest and subject to lags

 

Mumbai: Rise in food and crude oil prices could have contributed to high in inflation in past two years despite tight monetary policy, says a working paper from the Reserve Bank of India (RBI), reports PTI.

"Despite the monetary tightening by the RBI during 2010 and 2011, inflation remained high and this could be attributed to the structural component of food inflation as well as the surge in international commodity prices beginning the second half of 2010 and continuing into the first half of 2011," the paper has concluded.

However, it said, the evidence for both India and other countries suggests that the impact of monetary policy actions on inflation is modest and subject to lags.

The central bank, however said that the views expressed in the paper are those of authors and not that of the Reserve Bank of India.

Inflation was persistently high during 2010 and 2011. In response, monetary policy was progressively tightened by the RBI beginning March 2010.

The effective policy rate was increased by 525 basis points (bps) from 3.25% in March 2010 to 8.50% in October 2011.

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