Even as India's annual inflation rate touched 10.16 per cent in May, Finance Minister Pranab Mukherjee on Monday ruled out the possibility of interest rates rising in the short term. He said he expected inflation to be on the higher side till the middle of July.
However, K C Chakrabarty, deputy governor, Reserve Bank of India, did not rule out a mid-term policy action. Banks, too, expected an upward bias in interest rates.
"Inflation is surely a matter of concern, because food inflation is rising and the wholesale price index has reached a double-digit figure. It will continue till the middle of July, as after that we will get to know the trend of monsoons. Also, the pressure on food prices will probably start coming down," Mukherjee said at a press conference after a meeting with chief ministers of eastern and north-eastern states and heads of public sector banks here on Monday.
On if a rise in interest rates was on the cards, he said, "No, I am not thinking of raising interest rates now. There will be inflationary pressure till July, but this time I am not altering interest rates."
On the supply side, the government had taken steps like easing imports of pulses, sugar and edible oil to control inflation, he said.
Data released by the commerce ministry showed prices of food articles rose 16.49 per cent last month, against 16.87 per cent in April, while that for fuels rose 13.05 per cent.
"On the monetary side, we took steps in the last policy, and mopped up some liquidity. We have to keep in mind that the legitimate credit