The Reserve Bank of India on Monday hinted at a hike in key rates in its mid-year year policy review on Tuesday, saying that inflation is above the comfort level -- an issue which the government has taken up with the central bank.
"The RBI's policy stance is likely to be shaped by the dual goals of maintaining the growth momentum in an atmosphere of global uncertainty, while striving to moderate inflation further," the central bank said in its macroeconomic and monetary developments report released on Monday.
The RBI said overall inflation, which stood at 8.62 per cent in September, is 'above the comfort level,' even as it retained economic growth outlook for the current fiscal at 8.5 per cent.
It noted that uncertain global outlook, and the dominance of supply rigidities in certain sectors that impart rigidity to the inflation path, pose greater challenges for monetary policy.
This year, the central bank has raised key rates five times, eventually aimed at taming public consumption, but Finance Minister Pranab Mukherjee feels that inflation is still a 'matter of concern.'
"Let us wait. RBI policy statement will be made shortly. . . I am in discussion with RBI Governor (D Subbarao)," the minister told reporters in New Delhi on Monday.
Subbarao, who had met Mukherjee on Friday and is believed to have discussed macro-economic situation with him, is widely expected to go for another 25 basis points hike in repo (short-term lending) and reverse repo (borrowing)