"The government and RBI are fully committed to price stability. Inflation has to be kept under watch," Ashok Lahiri, chief economic advisor said on the sidelines of a conference of World Bank, DFID and London School of Economics.
RBI Governor's statement on the issue of inflation is quite clear that inflation has been somewhat moderate, Lahiri said. The wholesale price index-based inflation stood at 5.38 per cent for week ended May 21.
Analysts expect the inflation to remain low mainly due to "base-effect" as prices witnessed sharp rise during the same time last year. To a question on increase in manufacturing products portion of inflation, he said that is why inflation needs to be kept under watch.
The policy to ensure moderate inflation is necessary to ensure stability in the bond market, which had taken a beating last year due to the price spiral resulting in lower profits of many banks.
Lahiri also said that yields on government securities and interest rates are related to each other, which are in turn dependent on the inflation.
The statement assumes importance in the wake of global oil prices soaring to near $55 a barrel on Wednesday after the US government said America's commercial petroleum inventory fell sharply last week.