Monetary policy focus should be to tame inflation: Reserve Bank deputy governor Subir Gokarn

MUMBAI: Reserve Bank deputy governor Subir Gokarn today said that monetary policy should be focused on containing inflation as lower prices can support sustained growth in the long term.

"It is important to keep inflation under control to support a sustained process of growth," Gokarn told a banking summit here today.

Citing historical anecdotes of central banks focusing on growth and the negative consequences thereof, Gokarn, who is in-charge of the monetary policy at the central bank, said it is important for the monetary policy to focus on inflation control.

The comments from the deputy governor come a day after government data said inflation rose up to a 10-month high of 7.81 per cent in September and a fortnight ahead of the second quarter monetary policy announcement on October 30.

Incidentally, Reserve Bank Deputy Governor Anand Sinha yesterday had said the scope of monetary policy has expanded beyond inflation targeting to factors like checking financial imbalances.

"The monetary policy has an expanded objective...It has a larger role than simple inflation targeting," Sinha had said.

Responding to a query, Gokarn, who was addressing a banking meet organised by the Financial Times and Yes Bank here, conceded that the monetary policy should not alone be responsible for taming inflation and it needs to be complemented by the fiscal policy and supply side factors.

"It would be great if fiscal and supply side policies also help to keep the inflation pressure down," he said.

On the impact of the third round of stimulus by the US, Gokarn said it has not led to a surge in commodity prices as yet unlike earlier rounds and welcomed it as a "relief" for the country.