Beware of over action, ex-governor YV Reddy cautions RBI

Given surprisingly high inflation numbers in February and March, and rising global commodity prices, experts see a rate hike on the May 3. But veteran banker YV Reddy says the Reserve Bank of India (RBI) needs to take stock of action already taken, since monetary policy acts with a lag. CNBC-TV18's Vidhi Godiawala reports.

Beware of over action! That's the word of caution former RBI governor YV Reddy has for the RBI, as it prepares to present a crucial credit policy next week, in the backdrop of near double-digit inflation.

YV Reddy, former governor of RBI says, "The monetary policy actions, invariably, have a lag. Today, what assessment we made is whether the RBI actions that have been taken in the recent past, whether the transmission has been going through. If the transmission is going through effectively, then we can confidently say the transmission is going through. Therefore, inflation will come under control. It may be necessary to make an assessment of the extent of transmission, extent of actions already taken and extent of non-monetary aspects before you decide to take any monetary action."

However, Reddy agrees that RBI would have to do something about the rising inflation expectation.

The former governor says,