Although the direct role of monetary policy in combating food price pressures is limited, in the face of sustained high food inflation, monetary action may still be warranted to anchor inflation expectations, Reserve Bank of India's Governor Duvvuri Subbarao said on Tuesday.

According to Subbarao, a lasting solution to food price pressures lies in supply responses. Finally, the outlook on food inflation will be determined by the speed and quality of such a supply response by the government.

He observed that the driving factors behind food inflation are shift in dietary habits towards protein foods; pressure stemming from inclusive growth policies and large increases in the minimum support prices of food grains.

Additionally, shocks from global food inflation and financialization of commodities also contributed to high inflation.

Elsewhere, RBI Deputy Governor Subir Gokarn told reporters that the rupee is moving according to market dynamics. The central bank has no real target or a rate in mind.

The immediate impact of the weakness in the rupee will be on inflation. "We should not be looking at the short-term only when we make these judgments," he said.

Any action that has been suggested also has potential adverse consequences down the road. "So, we've got to balance out these two," added Gokarn.

RTTNews