Inflation likely to stay high hurting growth: RBI

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Mumbai, Jan 24 (PTI) The Reserve Bank today said demand-supply mismatch and rising global commodity prices wouldcontinue to put pressure on inflation, which could hurt theeconomic growth.

"Persistent high inflation could endanger the growthobjective and also amplify risks to inclusive growth,containing inflation will have to be the predominant objectiveof monetary policy in the near-term," RBI said in itsmacroeconomic review released on the eve of the quarterlypolicy.

It said that the upside risk to inflation have increasedand supply side constraints and high global commodity pricescould dampen the impact of tight monetary policy.

"While inflation is likely to soften in coming months itis likely to stay elevated above the earlier anticipatedpath," it said. The RBI has projected overall inflation to beat 5.5 per cent by March end.

The overall inflation for December shot up to 8.43 percent on high prices of food items, from 7.48 per cent inNovember.

The RBI said continued high food inflation is the maincause of overall inflation holding up, adding that return ofinflation to a more acceptable level would be gradual.

Ahead of the third quarter monetary policy review, theRBI said demand-supply mismatch in certain food items wouldkeep prices high.

"The upside risks to inflation, particularly from theimpact of supply rigidities and hardening commodity priceshave increased, which could dampen the expected impact ofmonetary policy to some extent," it said.

The RBI said that inflation could be contained if thegovernment takes steps to improve supply side bottlenecks andmake farm gate products easily available at the retail end.

The RBI said it expects some moderation in the foodinflation, which is currently in double digits, with theadvent of rabi crops in the market.

The food inflation for the week ended January 8 stood at15.52 per cent. It had shot up to 18.32 per cent in the end ofDecember on high prices of vegetables, including onion.

"Persistence of food inflation has become a primaryimpediment to faster moderation of inflation," it said. MorePTI JD CS

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