While this will bring in greater macroeconomic stability, with import cover rising to over 12 months, it may also lead to some uptick in inflation , say treasury officials.When Patel assumed the reins of the central bank, the forex kitty was at USD 367.766 billion (as of September 2, 2016). "The forex reserves have been rising as the central bank is accumulating greenbacks by selling the rupee in the market which is already awash with liquidity. The rupee has for long been trading in the 64.50-64-10 range.Concurring this view, the treasury head of another state-run bank said, "Rising liquidity may play spoilsport for central bank's mandated inflation fight. Already after a dramatic dip in June to 1.54 per cent, CPI has almost doubled to 2.36 per cent in July and this does not augur well for the inflation fight. "The surge in reserves is on account of higher capital inflows from foreign portfolio investors and other funds.

Source: Economic Times August 27, 2017 07:41 UTC