No need to change RBI's inflation comfort level, says Rangarajan

.....In 1998, Rangarajan had called inflation rate at six-seven per cent as “acceptable level”. His idea of threshold was: at what level of inflation do adverse consequences set in? “Then, inflation level was as high as 10-11 per cent, so cutting down inflation to six per cent was also very difficult,” said Rangarajan. He noted that high inflation created problems on the exchange rate side, and it was desirable to contain inflation to four-five per cent — a comfort zone as set by RBI. According to Deepak Mohanty, Executive Director, RBI, if inflation persisted beyond the threshold level of 4-5.5 per cent, it could lower economic growth over the medium term. In his paper titled “Inflation Threshold in India: An Empirical Investigation,” he said prolonged high inflation, even if originating from the supply side, could give rise to increased inflation expectations and cause general prices to rise.......

Read - BS