Hinting at a hike in its key rates, the Reserve Bank on Monday said it would continue exiting from its easy money regime to check double-digit inflation, while ensuring stable economic growth.
"Given the risk to inclusive growth from high inflation, the monetary unwinding that started in October, 2009 should continue till inflation expectations are firmly anchored and inflation is brought down," RBI said in its macroeconomic report.
The Reserve Bank is set to unveil its quarterly review of the annual monetary policy on Tuesday. It is widely expected to hike its short-term lending and borrowing rates (repo and reverse repo) by at least 0.25 per cent each to tame inflation, which was 10.55 per cent in June.
"The major policy concern...would be to contain inflationary pressures and anchor inflationary expectations," the central bank said.
The wholesale inflation is in double digits for the past five months due to high food and fuel prices against RBI forecast of 5.5 per cent by end-March.
According to economists, the headline inflation is no longer confined to food items but has spread to manufactured products.
Citing a continuing growth momentum, the Reserve Bank professional forecasters upped their 2010-11 GDP growth projection to 8.4 per cent against 8.2 per cent reported in the previous survey.
However, the apex bank cautioned that uncertain external environment is a major risk to growth in the near-term.