Sat, 09 Mar 2013 20:45:00 GMT | By Reuters

RBI chief rejects high inflation as 'new normal'

India's headline inflation remained above 7 percent for the last three years before falling to 6.6 percent in January


RBI chief rejects high inflation as 'new normal' (© Reuters)

Mumbai: The Reserve Bank of India (RBI) rejects the notion that high inflation is the "new normal," RBI Governor Duvvuri Subbarao said, noting that many of the supply-driven causes of inflation can be corrected by appropriate policies.

"Accepting a new normal for inflation not only has no theoretical or empirical support, but entails the moral hazard of policy inaction in dealing with supply constraints," Subbarao said in the text of a speech to bankers in New Delhi on Friday, a copy of which was made available to journalists

India's headline inflation remained above 7 percent for the last three years before falling to 6.6 percent in January and the central bank, considered a global outlier for keeping interest rates high despite slowing economic growth, only resumed cutting rates in January after a gap of nine months.

Some economists have argued that the central bank should adjust its policies towards an acceptance of persistently higher inflation.

(Continued)
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