‘RBI has no bias either to reduce or hike rates’
2 Oct 2014 11:38 PM GMT
The Reserve Bank has no bias either to cut or hike the key rates and the direction of the monetary policy will be influenced entirely by data, Governor Raghuram Rajan said.
‘Our policy stance today is reasonable and we see no reason to alter it today based on the information we have. As data comes in, we will have a better view and will adjust accordingly. So, I should not presume that we are either biased towards raising rates or cutting rates at this point,’ he said at the customary post-policy analysts call.
After choosing to hold the rates, Rajan had on Tuesday said that risks for achieving 6 per cent inflation target for retail inflation by January 2016 have reduced over the last two months.
He had, however, said that the risks for achievement of the target are still on the upside and pointed to modelling done by RBI which said inflation will be at 7 per cent in the last quarter of FY16.
Rajan reiterated that subjective assessments and judgement of those forming the policies give the confidence that inflation will indeed cool down to 6 per cent by January 2016.
The RBI governor, labelled as an ‘inflation warrior’ for keeping the rates high too long, had earlier said that the RBI is not desirous of keeping the rates high and wants inflation number to come down.
Consumer Price Index or retail inflation cooled down marginally to 7.8 per cent in August from 7.96 per cent in July, below the 8 per cent target set for January 2015 as part of the RBI's glide path.
‘If the 2016 January inflation objective is under threat in any serious manner then we would look to tighten. The flip-side is that if inflation comes down earlier than that on a durable basis, then we would look to be more accommodative,’ RBI Deputy Governor Urjit Patel, who heads the monetary policy department, said.
‘Our policy will be determined solely by reading our inflation data points and projections thereof,’ he said.
With food inflation being a major worry fanning the retail inflation, Rajan said we should focus on other aspects like cold storage facilities, improving the logistics and finding newer market places for the produce to reduce the seasonal volatility in prices.
‘Our policy stance today is reasonable and we see no reason to alter it today based on the information we have. As data comes in, we will have a better view and will adjust accordingly. So, I should not presume that we are either biased towards raising rates or cutting rates at this point,’ he said at the customary post-policy analysts call.
After choosing to hold the rates, Rajan had on Tuesday said that risks for achieving 6 per cent inflation target for retail inflation by January 2016 have reduced over the last two months.
He had, however, said that the risks for achievement of the target are still on the upside and pointed to modelling done by RBI which said inflation will be at 7 per cent in the last quarter of FY16.
Rajan reiterated that subjective assessments and judgement of those forming the policies give the confidence that inflation will indeed cool down to 6 per cent by January 2016.
The RBI governor, labelled as an ‘inflation warrior’ for keeping the rates high too long, had earlier said that the RBI is not desirous of keeping the rates high and wants inflation number to come down.
Consumer Price Index or retail inflation cooled down marginally to 7.8 per cent in August from 7.96 per cent in July, below the 8 per cent target set for January 2015 as part of the RBI's glide path.
‘If the 2016 January inflation objective is under threat in any serious manner then we would look to tighten. The flip-side is that if inflation comes down earlier than that on a durable basis, then we would look to be more accommodative,’ RBI Deputy Governor Urjit Patel, who heads the monetary policy department, said.
‘Our policy will be determined solely by reading our inflation data points and projections thereof,’ he said.
With food inflation being a major worry fanning the retail inflation, Rajan said we should focus on other aspects like cold storage facilities, improving the logistics and finding newer market places for the produce to reduce the seasonal volatility in prices.
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