OECD to RBI: hike interest rates to soften inflation

The Reserve Bank of India (RBI) must tighten its monetary policy fairly soon to check rising inflation, the Organization for Economic Cooperation and Development (OECD) said. "Given the magnitude of easing and the speed at which inflation has bounced back, monetary policy will need to be tightened fairly soon," the Paris-based adviser to the world's most industrialised nations said. India's consumer price index (CPI) for industrial workers may average 5.4% in the next fiscal year starting April 1, 2010, more than double the rate in the current year, the OECD said. During the same period, India’s economic growth may accelerate to 7.3% from 6.1%, it said in a report. "Given that activity is expected to strengthen relatively quickly and that the recovery is likely to have begun with only a modest level of slack in the economy, delayed fiscal consolidation will also contribute to higher inflationary pressures," the OECD said.