Rajan keeps rates same to balance growth, inflation
19 Dec 2013 6:04 AM IST
But ‘if inflation in food and fuel do not fall, the RBI will act on off policy date,’ he quickly added after unveiling the mid-quarter review of monetary policy.
The RBI has kept the short-term lending (Repo) rate unchanged at 7.75 per cent while the cash reserve ratio (CRR) remained at 4 per cent. The next policy review is due on 28 January.
Noting that current inflation is too high, Rajan said, ‘given the weak state of economy, the inadvisability of overly reactive policy action, as well as the long lags with which monetary policy works, there is merit in waiting for more data to reduce uncertainty.’
‘There are obvious risks to waiting for more data, including the possibility that tapering of quantitative easing by the US Fed may disrupt external markets and that the RBI may be perceived to be soft on inflation,’ he noted.
Rajan has increased the key rate by 0.50 per cent in two instalments since taking over as RBI Governor in September. Data released last week showed November consumer price inflation soaring to a nine-month high of 11.24 per cent and inflation based on the wholesale price index (WPI) zooming to a 14-month high of 7.52 per cent. October factory output shrank 1.8 per cent in, the first contraction in the Index of Industrial Production (IIP) in four months.
The RBI has kept the short-term lending (Repo) rate unchanged at 7.75 per cent while the cash reserve ratio (CRR) remained at 4 per cent. The next policy review is due on 28 January.
Noting that current inflation is too high, Rajan said, ‘given the weak state of economy, the inadvisability of overly reactive policy action, as well as the long lags with which monetary policy works, there is merit in waiting for more data to reduce uncertainty.’
‘There are obvious risks to waiting for more data, including the possibility that tapering of quantitative easing by the US Fed may disrupt external markets and that the RBI may be perceived to be soft on inflation,’ he noted.
Rajan has increased the key rate by 0.50 per cent in two instalments since taking over as RBI Governor in September. Data released last week showed November consumer price inflation soaring to a nine-month high of 11.24 per cent and inflation based on the wholesale price index (WPI) zooming to a 14-month high of 7.52 per cent. October factory output shrank 1.8 per cent in, the first contraction in the Index of Industrial Production (IIP) in four months.
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