No rate hike till economy’s back on track: RBI

NEW DELHI: The Reserve Bank of India (RBI) will not raise key policy rates until the economy is back on the high-growth track, RBI governor Duvvuri Subbarao said here on Tuesday. RBI has cut its benchmark interest rate six times from October 2008 through April.

���We will not exit the expansionary monetary policy unless we are sure that recovery is secured... but soon after the recovery is secured, we have to unwind the accommodative monetary policy,��� Mr Subbarao said.

RBI will look at a number of factors like the wholesale price index (WPI)-based inflation, consumer price index (CPI)-based inflation, components within inflation, industrial growth and credit expansion, while unwinding the soft monetary policy. According to Mr Subbarao, there is need to keep a close check on capital inflows into the country as surplus cash in the global financial markets may find their way here if there is an interest rate arbitrage opportunity.

���This question of exit will be upon us much sooner than most of the country. We have to take a call on supporting the recovery and stemming inflationary pressure,��� he said.

Pointing out that negative WPI inflation is statistical in nature, Mr Subbarao said ���there are inflationary pressure this fiscal ...and CPI inflation is in double digit���.

RBI in its July monetary policy review had said the economy would grow at 6% or more in the current fiscal year while it raised its inflation forecast to 5% from 4% by the end of the financial year. Annual inflation as measured by WPI is currently at negative 0.12% in the week to August 29.

���The challenge before us is going to be withdrawing the monetary accommodation and supporting the drivers of growth,��� Mr Subbarao said. ���We will not exit until we are sure the recovery is secure���, even as inflationary pressure builds up. Gains in wholesale prices may exceed 5.2% by the end of March, he said.