India’s central bank said reducing inflation is the “dominant” goal at the moment, signaling the possibility of an interest-rate increase on Tuesday.

“The anti-inflationary focus of monetary policy would have to continue,” the Reserve Bank of India said in a report on Monday. “Since a lower inflation regime is essential for sustainable high growth, containing inflation becomes the dominant policy objective in the current environment.”

Governor Duvvuri Subbarao may join South Korea and Thailand in raising borrowing costs this month after boosting them six times in 2010, the most by any central bank in Asia. The move will buttress government efforts to cool inflation after Prime Minister Manmohan Singh unveiled plans to import onions from Pakistan and keep a ban on exports of lentils and edible oils. (Bloomberg)

“The RBI’s pretty hawkish stance indicates that a rate hike is a done deal,” said Shubhada Rao, a Mumbai-based economist at Yes Bank Ltd. “Inflation is becoming a huge challenge for policy makers.” 

(Bloomberg)