The International Monetary Fund has hailed moves by India’s central bank to hike interest rates in an attempt to curb the rising cost of living. “The Reserve Bank of India (RBI) has acted successively and substantially, in a clear trend to maintain its policy stance until inflation declines,” said the IMF’s Asia-Pacific department director Anoop Singh.
“We strongly welcome the RBI’s monetary policy actions and are confident that with its stated policy stance, inflation will start trending down in due course,” Singh told a news conference in Mumbai. His comments came after the RBI last week hiked rates by a higher-than-expected 50 basis points. It was the ninth rate increase in 15 months and came after data showed annual inflation had unexpectedly risen to 8.98 percent in March from 8.31 percent the previous month.
RBI governor Duvvuri Subbarao said short-term economic growth may have to be sacrificed in the fight against inflation, fuelled by rises in the cost of food and commodities such as fuel. Singh said the IMF expects inflation in India to peak by mid-2011 and then start moderating, echoing the RBI’s assessment. Asian economies including South Korea, Indonesia, Taiwan and China are all battling inflation, which has become a major headache for Indian Prime Minister Manmohan Singh as he oversees a strongly growing economy.