Retail inflation measured by the consumer price index (CPI) has risen sharply across food and non-food constituents, including services, keeping inflation expectations high, the Reserve Bank of India said in its Second Quarter Review of Monetary Policy 2013-14.
   
"Notwithstanding the expected edging down of food inflation, retail inflation    is likely to remain around or even above 9 percent in the months ahead, absent policy action," the Central Bank said.
   
RBI Governor Raghuram Rajan pitched for an appropriate policy response to tame wholesale as well as retail inflation. "Overall WPI inflation is expected to remain higher than current levels through most of the remaining part of the year warranting an appropriate policy response," Rajan said in the monetary policy review.
   
Inflation as measured by the wholesale price index (WPI) accelerated in September for the fourth month in a row to 6.46 percent. Retail inflation rose marginally to 9.84 percent in September, mainly due to a hike in food prices, particularly of vegetables.
   
The RBI said food price pressures may ease with the arrival of the kharif harvest and seasonal moderation. Food inflation in the WPI basket stood at 18.40 percent in September.
   
The RBI on Tuesday hiked the lending (repo) rate by 0.25 percent to 7.75 percent, saying it was important to break the spiral of rising price pressures in order to curb the erosion of financial saving and strengthen the foundations of growth.
   
The policy stance, the central bank said, "is intended to curb mounting inflationary pressures and manage inflation expectations in a situation of weak growth."
   
The RBI said it plans to introduce inflation-indexed National Saving Securities for retail investors in November or December in consultation with the government.

RBI closes special window for Mutual Funds

With the improvement in liquidity conditions, Reserve Bank decided to close the special window for commercial banks to meet the cash requirements of mutual funds (MFs) with immediate effect.

RBI, in July, had opened a special borrowing window of Rs 25,000 crore to help the crisis-ridden mutual funds tide over liquidity problems.

"With the normalisation of exceptional measures and taking into consideration the improvement in liquidity conditions since then, it has been decided to close this window with immediate effect," RBI Governor Raghuram Rajan said in the second quarter monetary policy review.

RBI, on July 17, had opened a special three-day repo auction under which banks would be encouraged to raise funds totalling Rs 25,000 crore at 10.25 percent for on lending to mutual funds.

The last time RBI had opened such a facility was in 2008, after the collapse of Lehman Brothers triggered a chain reaction and caused a global financial crisis that sent fixed income markets in a tizzy.

At the end of September quarter, Assets under management (AUM) of the mutual fund industry fell by 4.5 percent to Rs 8.08 lakh crore from Rs 8.46 lakh crore in the previous three-month period.

(Agencies)

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Retail inflation to remain above 9 percent, cautions RBI

      

Mumbai: The common man is unlikely to get relief from rising prices in the months ahead, with the RBI on Tuesday saying retail inflation will remain above 9 percent during the course of this financial year.

      

Retail inflation measured by the consumer price index (CPI) has risen sharply across food and non-food constituents, including services, keeping inflation expectations high, the Reserve Bank of India said in its Second Quarter Review of Monetary Policy 2013-14.

      

"Notwithstanding the expected edging down of food inflation, retail inflation       is likely to remain around or even above 9 percent in the months ahead, absent policy action," the Central Bank said.

      

RBI Governor Raghuram Rajan pitched for an appropriate policy response to tame wholesale as well as retail inflation. "Overall WPI inflation is expected to remain higher than current levels through most of the remaining part of the year warranting an appropriate policy response," Rajan said in the monetary policy review.

      

Inflation as measured by the wholesale price index (WPI) accelerated in September for the fourth month in a row to 6.46 percent. Retail inflation rose marginally to 9.84 percent in

September, mainly due to a hike in food prices, particularly of vegetables.

      

The RBI said food price pressures may ease with the arrival of the kharif harvest and seasonal moderation. Food inflation in the WPI basket stood at 18.40 percent in September.

      

The RBI on Tuesday hiked the lending (repo) rate by 0.25 percent to 7.75 percent, saying it was important to break the spiral of rising price pressures in order to curb the erosion of financial saving and strengthen the foundations of growth.

      

The policy stance, the central bank said, "is intended to curb mounting inflationary pressures and manage inflation expectations in a situation of weak growth."

      

The RBI said it plans to introduce inflation-indexed National Saving Securities for retail investors in November or December in consultation with the government.


RBI closes special window for Mutual Funds

With the improvement in liquidity conditions, Reserve Bank decided to close the special window for commercial banks to meet the cash requirements of mutual funds (MFs) with immediate effect.

RBI, in July, had opened a special borrowing window of Rs 25,000 crore to help the crisis-ridden mutual funds tide over liquidity problems.

"With the normalisation of exceptional measures and taking into consideration the improvement in liquidity conditions since then, it has been decided to close this window with immediate effect," RBI Governor Raghuram Rajan said in the second quarter monetary policy review.

RBI, on July 17, had opened a special three-day repo auction under which banks would be encouraged to raise funds totalling Rs 25,000 crore at 10.25 percent for on lending to mutual funds.

The last time RBI had opened such a facility was in 2008, after the collapse of Lehman Brothers triggered a chain reaction and caused a global financial crisis that sent fixed income markets in a tizzy.

At the end of September quarter, Assets under management (AUM) of the mutual fund industry fell by 4.5 percent to Rs 8.08 lakh crore from Rs 8.46 lakh crore in the previous three-month period.