Reserve Bank Governor D Subbarao said the inflation numbers on both the wholesale and retail front are way above the central bank's comfort level. Subbarao said, "we are way above the threshold" and a level of around 5 per cent on the headline inflation is the RBI's threshold.
His comments come ahead of the July 31 quarterly monetary policy. There is increased clamour for rate cuts by the industry as growth has slowed dowm. Earlier in the day, data showed headline inflation slowing to a five-month low of 7.25 percent and consumer price index-based inflation hovering at 10.36 percent.
Defending the RBI's actions of continuous rate tightening in the past, Subbarao said the impact on growth has only been short-term and the RBI has been successful in trying to protect growth with price stability in the medium-term. "I must hasten to add that sacrificing growth is only in the short-term. In the medium-term, there is no trade-off between growth and inflation," the RBI governor said.
"There is a threshold level of inflation. Below the threshold, may be, there is a trade-off between growth and inflation. But above the threshold, there is definitely no trade-off between growth and inflation," he said.
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