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MUMBAI : India's new head of the Reserve Bank of India took office on Friday, pledging to wrestle down inflation riding at 13-year highs.
Duvvuri Subbarao, who was appointed for a three-year term to succeed Yaga Venugopal Reddy, told reporters at the Bank's headquarters in Mumbai: "My immediate priority is to manage and anchor inflation."
Reddy, who is retiring, steered India's aggressive monetary tightening cycle, which began in late 2004.
Subbarao takes charge with India's annual inflation rate at its highest level since the current inflation series began being compiled 13 years ago.
On Thursday, India's inflation slowed for a second straight week to 12.34 percent. But the figure was still far above the central bank's target of seven percent for the fiscal year to March 31, 2009.
Economists said they believe the central bank would tighten monetary policy at least one more time to get inflation under control before gradually starting to lower interest rates, most likely in 2009.
Analysts said they expected Subbarao to pursue the same hawkish policy against inflation as Reddy.
"The hawkish policy stance will continue," said D.K. Joshi, economist with credit rating agency Crisil.
The Reserve Bank of India meets to review mid-term monetary policy on October 24.
"The new RBI governor likely carries a strong tightening bias, according to his recent comments on inflation and interest rates," said Sherman Chan, economist at Moody's subsidiary Economy.com.
"Although inflation has shown signs of easing in recent weeks, it is insufficient to stop the RBI from further raising rates and cash reserve requirements in the October monetary policy review," she said.
The RBI has raised interest rates a total of three times in June and July, which has pushed the short-term lending rate to a seven-year-high 9.0 percent.
Subbarao once described inflation as "the king of tax on the poor" and has called hiking rates the "obvious" response to cutting inflation.
He is a former World Bank economist who most recently held the job of finance secretary, the most senior post in the finance ministry.
- AFP /ls
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