"We are looking whether the recent increase in inflation is temporary and whether the monsoon will continue to be near normal. The oil price development is very beneficial and we will await greater transmission of our past actions by banks while we look and monitor developments for emerging room," Rajan told reporters during the customary post-policy interaction with journalists here this morning.
In the policy statement, Rajan said the RBI continues to have an accommodative stance, which was adopted in January this year with a surprise rate cut. Despite favourable base effect, headline inflation surged to <g data-gr-id="49">nine-month</g> high of 5.40 per cent in June which resulted in expectations, especially at <g data-gr-id="50">individual</g> level, getting elevated, RBI said.
"Inflationary expectations do get altered considerably by certain salient items such as food, milk and vegetables. Given that, yes, it (elevated expectations) is a concern but one should keep that in perspective," Rajan said.
Speaking on the <g data-gr-id="54">occassion</g>, RBI Deputy Governor Urijit Patel said, at the moment, the risks on inflation are balanced but exuded confidence that the central bank will be able to meet the <g data-gr-id="53">January,</g> 2016 target of 6 <g data-gr-id="55">per cent</g> with inflation coming below it. However, the policy document pegged the January price index at 5.8 <g data-gr-id="56">per cent</g>, which is 20 basis points below the April and June estimate. With wholesale price inflation continuing to <g data-gr-id="57">tread</g> in the negative zone for the eighth consecutive month, and calls for rate cuts thereof getting shriller, Rajan said the RBI prefers to formulate its policies based on CPI which gives a better picture of the pinch at the individual level.
"It's convenient to look at the whole price index, then you can do all your work on inflation management based on factors from outside on which we have no control.
"But if we really want to manage inflation, we have to look at the sum total of inflation, especially inflation that concerns consumers, which determines household savings, wage pressures," Rajan said.
Even though the policy document flagged slowdown in exports and steady depreciation of the rupee as major concerns, Rajan said there is no level for the rupee which the RBI tracks and intervenes in the forex market only to reduce volatility. Rajan, however, conceded that factors like <g data-gr-id="44">competitiveness</g> in the industry are looked into in the management of exchange rates.
On growth, where the central bank has maintained its April GDP estimate of 7.6 <g data-gr-id="37">per cent</g> for the current fiscal, Deputy Governor Urijit Patel said the RBI looks at other <g data-gr-id="36">data-points</g>, including the
purchasing managers index, auto sales, freight traffic, factory output and credit growth while formulating the monetary policy.
Arundhati rules out lending rate cuts for now
Bankers on Tuesday ruled out any immediate lowering of interest rates even as the Reserve Bank <g data-gr-id="84">rapped</g> them for not fully passing on to borrowers three cuts in the key rate this year, saying it expects them to do so in the near future.
Arundhati Bhattacharya, Chairperson of the country’s largest lender SBI said she does not see any more rate cuts in the near future and added that any such action would depend on the economic growth and other market factors.
“Going forward, it is going to be a function of how the economy develops, what are the competitive pressures. Right now these things are still not giving us space for any further rate cuts. I do not think we see any things in the immediate future,” she said. i