NEW DELHI: Chief economic advisor Mr Kaushik Basu has said the Reserve Bank is likely to assess inflation trends in March before finalising the forthcoming annual monetary policy to be announced on April 20.

“The RBI raised repo and reverse repo rates (short-term lending and borrowing rates) to give signal to markets on inflationary expectations as inflation has slightly spilled over to manufactured products,” Mr Basu told PTI.
The chief economic advisor, however, noted that food inflation has been moderating and during the first week of March, there is considerable decline in it. “Fortunately, food inflation is coming down. This RBI action is a bit of anticipatory move,” Mr Basu said.
Inflation declined from 17.81 per cent in the last week of February, but still stood at higher level of 16.3 per cent in the first week of March. Mr Basu said food inflation will remain high for one more month, after which it will decline.
RBI on Friday had raised short-term lending and borrowing rates (repo and reverse repo) by 25 basis points to 5 and 3.5 per cent, exuding confidence “these measures should anchor inflationary expectations and contain inflation going forward.”
The RBI move came as a surprise, since it came a month before the central bank is scheduled to announce its annual monetary policy on April 20 for 2010-11.
To a query on whether RBI would further tighten monetary policy in April, Mr Basu said it would depend on how inflation pans out in March, figures of which would be available around the middle of next month.
If inflation does not spread much to other areas from food articles in March, the central bank may retain the rates, but if it spreads much to other areas, it may take further action. “That is a normal monetary practice,” Mr Basu said.