Chidambaram says RBI steps on inflation working

NEW DELHI (Reuters) - Recent anti-inflation steps by the Reserve Bank of India (RBI) have started working and more measures by the government to tame inflation, now at a 13-year high, are not ruled out, Finance Minister Palaniappan Chidambaram said on Thursday.

Chidambaram's comments, coming ahead of inflation data at the new weekly release time of 5:30 p.m. on Thursday, sent the benchmark 10-year bond yield down 2 basis points to 9.28 percent.

"There is still pressure on prices. There are signs that monetary steps are taking effect. M3 (money supply growth) is slowing down," Chidambaram told reporters.

India's wholesale price index rose 11.89 percent in the 12 months to June 28, on higher prices of fuel, metals and food.

A Reuters poll of analysts forecast this week's release would show annual inflation at 12.05 percent for the first week of July.

Last month, the RBI increased its key lending rate by 75 basis points to 8.5 percent, its highest in six years, and hiked banks' reserve requirements by 50 basis points in an aggressive effort to combat inflation.

Its next review is on July 29, and it is widely expected to tighten monetary policy again this year.

Because both its previous two moves were unscheduled, the market has been wary of another surprise tightening before the review, but Chidambaram's comments were seen as lowering that risk.

"We don't expect any inter-meeting rate move before the policy. Whatever will happen will happen in the policy now," said Arvind Sampath, head of bond trading at Standard Chartered.