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Inflation Level...

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"We have flagged this issue previously. So it is an issue which was well anticipated, though perhaps not to the extent to which prices have gone up," said Reddy after a speech at Columbia University in New York.
In terms of monetary policy response, Reddy said, "We have to review the position in the next few days. We are going to have a meeting as soon as we get back. So I don't want to preempt what we are going to discuss at this meeting."
"The level of inflation is unacceptable to us," he said. "In particular we have to see that aggregate demand management is consistent with supply side initiatives," he said.
"Naturally food prices play a large part, partly because they have a large weight in our indices, and partly because the inflation perceptions are influenced significantly by food prices," he said.
India's wholesale price index rose 7.41 per cent in the 12 months to 29 March, accelerating from the previous week's annual rise of 7.0 per cent, government data showed on Friday.
The rate was sharply above a median forecast of 7.03 per cent in a Reuters poll of analysts, and is the highest reading since 13 November 2004 when it was 7.68 per cent.
The annual inflation rate was 5.94 per cent during the corresponding week of the previous year.
The Indian wholesale price index is more closely watched than the consumer price index, which is published monthly, because it covers a higher number of products and is published weekly.
Reddy was in the US to attend the annual spring meetings of the IMF and World Bank in Washington D.C. on Saturday.
Asked about the impact on emerging markets of the recent volatility in world financial markets resulting from the global credit squeeze, Reddy said the question of "contagion" had arisen but Indian markets had been stable.
"The money, government securities and forex markets have been stable in India and in our view they will not be vulnerable in terms of direct and first round effects," he said.
"However the Indian equity markets which often reflect global trends have been volatile in recent months and that has some impact on changing sentiment. We have a bank dominated financial sector and banks have a strong capital base."

(Reuters)