Indian inflation shows moderation: RBI Governor

Mumbai, Sep 10: Duvvuri Subbarao, the new Reserve Bank of India (RBI) Governor said India's inflation rate is showing some signs of moderation but, it is still too early to conclude whether it represents a discernable trend. Subbarao, who took over from Y V Reddy on Friday, Sep 5 revealed this at his first press conference on Tuesday, Sep 10.

"Inflation expectations must be contained to enable sustained growth. So my short answer is, we are seeing some moderation, although I am not sure that we can see a discernable trend," Subbarao said referring to India's most widely watched inflation reading, the wholesale price index. "We've seen in the last few weeks food prices moderating. We've seen the supply response internationally, and our domestic food situation, the food outlook is quite comfortable. However, we will have to be watching the international situation, the commodity prices and also the food prices because even as food output might be comfortable, because of the high input prices, food prices may not moderate all that much," he added.

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Annual WPI inflation rate is running at 12.34 percent, down from a peak of 2.63 percent in early August. The RBI raised its key-lending rate, the repo rate, three times in June and July and it now stands at a seven-year high of 9.0 percent.

The RBI also raised banks' reserve requirements, known as the cash reserve ratio (CRR), in June and July to drain inflation-stoking cash from the banking system. Its next scheduled rate review is on October 24.

The yield on the benchmark 10-year bond edged lower to 8.44 percent from.45 percent ahead of the RBI Governor's comments.

The partially convertible rupee strengthened slightly to 44.79/80 per dollar from 44.81/82 beforehand.

ANI