RBI proposes inflation at 5 to 5.5 per cent

New Delhi, Sept 21: RBI Governor Y V Reddy today said the Bank proposes to keep inflation in the medium term within a limit of 5 to 5.5 per cent and projected GDP growth rate to be in the range of 7.5 to eight per cent during the current fiscal.

"The government also has a similar view on the inflation rate", Dr Reddy told reporters on the sidelines of a function here.

Dr Reddy said there has been a slight increase in prices of few commodities, but this did not warrant RBI to alter its projections on inflation rate for the current fiscal.

Dr Reddy also said the Government borrowings programme and its fiscal deficit were expected to be as per the budget targets.

He said the price increase in a few commodities has been a cyclical component but the overall effect on inflation was likely to be only marginal.

He said unless prices of petroleum soften on a sustainable basis, inflationary forecasts will remain same.

The Central Bank Governor, however, said inflationary expectations continued to be a source of worry.

Dr Reddy said liquidity in the economy was comfortable as RBI continues to absorb it.

UNI