Declining to be drawn into the issue of another interest rate hike, the RBI Deputy Governor, Dr K.C. Chakrabarty, said that rates have to be in line with inflation.
“The exact inflation figure does not matter; what is important is that inflation is still high. Given this situation, the RBI has no other instrument to rein it in other than rate hikes,” he said speaking on the sidelines of a seminar organised by FICCI on Friday.
Advocating a possible solution to the high inflation situation, Dr Chakrabarty said: “If inflation goes up, interest rates also go up everywhere in the world. If we want inflation to go down, we have to use technology to bring down the cost of products and services. It has happened in the case of mobile delivery charges where costs have not gone up over so many years.”
“The supply side issue has to be addressed to produce more with lower cost and that would bring down the production costs and hence inflation,” he added.
RBI's next monetary policy review is expected on October 25. A recent data released showed headline inflation remained close to double digits at 9.72 per cent in September.