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Prime Minister, Chidambaram hope inflation will come down

New Delhi: Prime Minister Manmohan Singh and Finance Minister P. Chidambaram on Friday expressed confidence that inflation would come down in the wake of Reserve Bank’s decision on Thursday to hike Cash Reserve Ratio (CRR).

“Let us hope so,” the Prime Minister said in response to a question on whether inflation would come down following measures taken to contain spiralling prices.

Mr. Chidambaram, however, had a word of caution, saying miracles should not be expected on the price front.

Pointing out that the government does not have control over prices of imported items, he exuded confidence that international prices would moderate in the next few weeks.

“I am confident that the international prices would also moderate in the next few weeks,” he told reporters on the sidelines of a function to release commemorative coins on 1857 War of Independence.

Mr. Chidambaram said the RBI’s decision to hike CRR would suck out over Rs. 18,000 crore, reducing liquidity to that extent.

The Reserve Bank on Thursday announced a 0.5 per cent hike in CRR in two phases — first phase on April 26 and the second on May 10 — to tame the soaring inflation that is hovering above seven per cent. The CRR is the mandatory cash deposit that banks keep with the central bank at all times.

“This (hike in CRR) will have a moderating effect on prices, but don’t expect miracles. It will take some time. We must be patient. We must not lose our nerve,” he said.

Mr. Chidambaram said the RBI’s decision was in conformity with his statement in Parliament that the government has taken and the central bank will take monetary measures.

“The RBI has consulted the government and it took a decision (to hike CRR),” he said.

However, the Finance Minister said it would take some time to control the soaring prices. — PTI

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