Chidambaram hopes tight monetary steps would tame inflation

BANGALORE: Finance Minister P Chidambaram on Friday hoped that tight monetary measures initiated by the Reserve Bank will tame rising inflation in about six months.

"We have no control on international commodities and crude oil prices. What we are trying to do, given the price hike, is to moderate aggregate demand by using tight monetary measures and sacrificing a bit of growth, Chidambaram said.

"This is the only way inflation can be tamed. There are signs of moderation (commodities and crude oil prices). But I cannot say whether the trend will continue," he said at a book reading function here.

Inflation has breached the psychological 12 per cent level at 12.01 per cent, highest in over 13 years, for the week ended July 26 as prices of pulses, spices, eggs, fish and meat among other things continued to rise.

To control inflation, The Reserve Bank had further tightened the money supply by increasing the short-term lending (repo) rate by 0.50 per cent and and mandatory cash deposits for banks (CRR) by 0.25 per cent in quarterly reivew of monetary policy on July 29.