Pranab Mukherjee defends RBI’s decision to hike key interest rate.

pranab mukherjeeMumbai: Finance minister Pranab Mukherjee today defended the Reserve Bank’s conclusion to hike the key interest rates by 25 basis points, saying that it was aimed at taming the inflation.

Mukherjee told to the reporters “Normally it (monetary policy) is formulated in consultation with the government, and fiscal policy and monetary policy go hand in hand.”

Mukherjee was here to meet the western region chief ministers and finance ministers and discus the precedence sector lending. Sources said only Maharashtra chief minister Prithviraj Chavan attended this annual meeting. Other states — Rajasthan, Gujarat, Madhya Pradesh, Goa, Chhattisgarh and Daman & Diu — were represented by state ministers.

Mukherjee said that “It is true that for the past 15 months the crucial rates have been adjusted and though inflationary pressures have come down, particularly the food inflation — from 22% in February 2010 to little less than 10% in the last fortnight, it is still very high and at unacceptable levels… (and so is core inflation which stood) at 9.8% in August.”

“Therefore, inflation is to be contained. And if the RBI considers it is necessary to adjust the crucial rates, they have done exactly so,” he added.

Wholesale price-based inflation has been balanced around the double-digit mark for the past 4 months and the latest number stands at a 13-month high of 9.78% for August, which accelerate from 9.22 percent in July. Last July, core inflation stood at 9.98 percent.

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