Pointing out that inflation rate is a little beyond comfort zone, the Prime Minister's Economic Advisory Council on Wednesday said the current situation is not favourable for a cut in interest rates.
"Inflation taken by itself is not favourable towards doing that (reducing interest rates)," EAC Chairman C Rangarajan told reporters in New Delhi.
The inflation rate stood at 5.11 per cent for the week ended March 1. It was for the second week in a row that the rate was over 5 per cent.
The Reserve Bank of India aims to limit average rate of inflation for the current fiscal at 5 per cent. "When the inflation rate is rising, it is always critical to bring down the rates, but the stand on interest rates is determined by a variety of factors," he said.
"We would have liked the inflation rate to stay somewhere between 4-5 per cent, preferably at 4 per cent level," he said. Blaming it on raising global food prices, he said now the food prices are rising abroad and therefore the option of importing foodgrain is not available for bringing down rising prices.
In the given domestic situation, there is a need for moderation of money supply, he said He also suggested, "We need to do both supply management as well as demand management."