Hard to predict when rupee-USD rate will stabilise: RBI

Moneycontrol Bureau

On the back of the free falling rupee against the US dollar, the Reserve Bank of India (RBI) is expected to contain the rate of inflation with top priority. However, the inflation has come off sequentially, though not reached the central bank's comfort zone.

"Inflation is still high. It is RBI's most important job to curb it. We have curtailed inflation to some extent in the last two years. However, prices of food items are still high," D Subbarao, RBI governor said on Thursday.

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He was visiting a village called Kurda near Indore, Madhya Pradesh. As a part of financial inclusion programme, the central bank decided to develop this village as a model one. He also spent some time at a local school interacting with the students. 

The wholesale price based inflation (WPI) fell to 4.7 percent in May 2013 as against 4.89 percent in April. The inflation in the food article category rose from 6.08 percent in April to 8.25 percent in May.

Commenting on the rupee slide against the greenback, the RBI governor said, it is difficult to say when the exchange rate is going to stabilize. There are both external and domestic factors behind rupee fall. The current account deficit (CAD) or imports in excess of exports, is a worry.

The Indian rupee last Monday hit a record low at 61.21 against the US dollar. Since May, the local currency has lost around 15 percent to the US currency. It has been the worst performing Asian currency. A depreciating rupee brings imported inflation. Importers, which are hit due to falling rupee, generally pass on the higher cost of imports to the end-consumers.

Subbarao expressed concern over the country's CAD, which remained high. CAD a year before FY13 was 4.2 per cent. In 2012-13, it was 4.8 per cent. It is one of the key parameters of RBI's monetary policy.

With agency inputs