Sizzling oil hobbles RBI’s inflation plan

KOLKATA: The rise in global crude oil prices may derail Reserve Bank of India’s (RBI) inflation management, even as it is fighting to ease liquidity in the banking system. Although inflation has softened in recent times, it is still over RBI’s comfort level and the central bank has expressed concerns as global crude oil prices hovered over $87 a barrel in the past few days. It even touched a 2-year high of $90.76.

“The rise in global oil prices may be seasonal. But the fact that prices are going up even in a situation when the overall state of global economy is still sluggish is obviously going to make the challenge of inflation management more difficult,” deputy governor Subir Gokarn said on Thursday after RBI’s central board meeting in Kolkata.

State-run oil companies like IOC, HPCL and BPCL are planning to increase petrol prices, following the increase in global prices. Governor D Subbarao said inflation is still above RBI’s tolerance level.