New Delhi: Reserve Bank of India (RBI) on February 12 said it was watching the situation in Iraq but asserted that the soft interest bias would continue.

The apex bank also said that the rise in inflation was not a cause for worry.

"We will be watching (the situation in Iraq)," RBI Governor Bimal Jalan told reporters when asked if the volatile situation in Iraq could impact interest rates in the country.

Speaking on the sidelines of an Associated Chambers of Commerce and Industry (ASSOCHAM)-NCAER (National Council of Advanced Economic Research) seminar, Jalan said the monetary policy has not changed.

"It is the same," he said.

Asked about the rise in yield of government papers, he said, "I have always said that market will take care of itself".

The yield on benchmark 10-year gilt rose to 6.4 to 6.5 per cent the last fortnight.

RBI had reduced bank rate by 0.25 per cent to a 29-year low of 6.25 per cent in the last busy season credit policy in October 2002.

Asked whether rise in inflation will force RBI to change its soft interest rate bias, Jalan said, "not yet".

"We will watch for another two-three weeks," he said, adding that there were "no worries" on the inflation front.

Inflation for the latest reported week rose to this fiscal's highest ever figure of 4.61 per cent mainly due to a 11 per cent increase in price of vegetables.

RBI had in its October policy projected inflation to be benign and forecast a GDP growth rate of 5-5.5 per cent for the current fiscal.

PTI