‘Monetary policy to focus stability’

New Delhi: The Reserve Bank of India on Monday said that focus of the monetary policy would be on price stability.

“The monetary policy will aim at creating an appropriate atmosphere of macro-economic stability, especially price and financial stability with a view to facilitate growth,” PTI quoted RBI Governor Y V Reddy as saying.

RBI last week tightened monetary policy to ease inflation by hiking short term lending rate and increasing the requirement for banks to park their cash with the central bank.

"In the recent period, the headline inflation, as measured by the Wholesale Price Index (WPI), remained above 6.0 per cent level during January-March 2007, touching 6.46 per cent for the week ended March 10, 2007, however, the average inflation was 5.3 per cent during the period April 2006 to March 10, 2007, " he added.

RBI recent credit policy projected annual inflation to remain in between 5-5.5 per cent for 2006-07.

“The ability to contain inflation rate at substantially below the world rate and the rate prevailing in non-oil-exporting developing countries during both phases is a testimony to the sound conduct of monetary policy,” Reddy said.

This is particularly encouraging because India faced many external shocks and adverse effects of imported inflation during phase II when it opened up the economy as opposed to the closed economy environment of phase I, he added.