Food prices to ease with rains, says RBI Deputy Governor

The Reserve Bank of India (RBI) has taken measures to tackle inflation and expects food inflation to subside with good monsoon rains, a deputy governor of the central bank said Friday.

“The call money rates have gone up and that is substantial tightening. We expect to see the effect of our actions in the second half of the

year. Actions act with a lag,” Deputy Governor Subir Gokarn, who heads the monetary policy division, said here Friday.

He was speaking to reporters on the sidelines of a conference on financial inclusion organised by Union Bank of India and Great Lakes Institute of Management near here.

According to him, the RBI is trying to address the demand side pressures on inflation as the supply side pressures are easing.

He said RBI looked at the inflation drivers – food and commodity. While food inflation will moderate with good monsoon rains, the commodity prices, mainly energy, will remain soft.

Looking at them it suggests prices will remain soft at least till the end of this fiscal, Gokarn said.

According to him, some features of global economic scenario will help in managing inflation here. The condition in Europe and US showed uncertainty which in turn may impact capital flows.

Gokarn said if the global growth is slow, commodity prices will soften and will help in managing domestic inflation.