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Inflation matter of concern: FM; RBI could take some steps

New Delhi: Finance minister Pranab Mukherjee today said inflation is a matter of concern, indicating that the Reserve Bank of India (RBI) could take some steps to check rising prices at its mid-year monetary policy review tomorrow, reports PTI.

"Inflation is a matter of concern. The main reason for the high level of inflation is food prices. Inflation (is expected) to further go down to a more acceptable level," Mr Mukherjee said at the Indian Banks' Association (IBA) conference.

The overall inflation for September was at 8.62%, much higher than RBI's acceptable level of 5%-6%.

Food inflation, which is reigning in double digits for the past three months, is feeding the overall inflation numbers. Food inflation in mid-October stood at 13.75%.

Mr Mukherjee's comment come just ahead of the Reserve Bank's second quarter monetary policy review tomorrow, in which the central bank is expected to hike policy rates by 25 basis points to tame inflationary pressure.

When asked about the possible rate hike action by the central bank, Mr Mukherjee said, "Let us wait. RBI policy statement will be made shortly... I am in discussion with RBI governor."

Since January, RBI has started reversing its soft monetary policy it began in September 2008, when global financial crisis deepened after the collapse of US financial major Lehman Brothers.

While few economists forecast another rate hike on Tuesday, others said that a slowdown in factory output numbers of August and core-sector figures of July might force RBI to give a rethink to its rate hike decision.

Industrial output growth in August slowed to a 15-month low of 5.6% from 15.2% in July. The six-core infrastructure output slowed down to 2.5% in September from 3.9% a month ago.

In a bid to tame inflation, the central bank has hiked its key short-term lending (repo) and borrowing (reverse) rates five times so far this year and experts see another 25 basis points hike in the key policy rates by RBI on Tuesday.

This year, the RBI has raised repo and reverse repo rates by 125 and 175 basis points respectively.

It had last hiked rates in its mid-quarterly review on 16th September. The repo and reverse repo rate currently stand at 6% and 5% respectively.

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