Early on in the year, inflation pressures had their origin in food prices, and accordingly our monetary policy response was aimed at containing the spillover risk to non-food inflation. Note that policy rates had gone down to historically low levels during the crisis, and an abrupt adjustment would have disrupted the market.
Our judgement, therefore, was that tightening should be done gradually, in small steps, so as to allow time for the banks and the private sector to adjust to a higher interest rate environment. 15. The inflation scenario changed starting August 2010 when global commodity prices surged higher than anticipated.