RBI Guv refuses to tinker with key rates
8 Jun 2016 6:23 AM IST
Announcing the bi-monthly monetary policy, he also exhorted banks to pass on the benefits of earlier rate cuts and emphasised that a better transmission of policy easing remains critical to support growth.
The key policy rate, repo, was left unchanged at 6.50 per cent and the cash reserve ratio at 4 per cent, with RBI citing the uncertainties on account of the surge in inflationary pressure and reversal in commodity prices. While Rajan asserted his monetary policy remains “accommodative”, the status quo on rates follows calls from some sections of the ruling BJP, including Rajya Sabha MP Subramanian Swamy, against his continuation at RBI for not making capital cheaper to boost the economy.
However, market experts and economists were mostly expecting RBI to keep rates unchanged and were more interested in any cues about his extension. On his part, the RBI Governor sought to make light of the speculation saying he would not be “cruel” to “spoil the fun” the media was having with speculation over his extension beyond the current tenure ending September 3.
But, an otherwise outspoken Governor came armed with a “prepared statement” to reply to questions on his tenure, which he read out when asked whether he would be at the helm in September-October period.
Keeping the suspense alive, he also listed out his “unfinished agenda” at RBI including on financial inclusion, cleaning up the books of banks and containing inflation – a comment seen by some as indication he might want to continue.
While industry continued to hope for a rate cut soon, stock market saw a 232-point rally in the Sensex, which some experts attributed to expectations about Rajan’s extension beyond his current tenure ending September 3.
Tuesday’s policy, the second bi-monthly policy of the current fiscal, may still be the last statement anchored by RBI Governor, as with the Monetary Policy Committee expected to be in place soon, the next policy could be announced by the committee and not the central bank alone.
The government said RBI’s policy statement was in line with the expectations. Economic Affairs Secretary Shaktikanta Das said, “RBI policy statement broadly endorses government expectations on GDP growth and inflation.” Rating agency Moody’s said the status quo was broadly in line with market expectations.
Won’t be ‘cruel’ to spoil fun: Rajan on 2nd term speculation
Amid intense speculation on whether he would continue or not as RBI Governor, an otherwise outspoken Rajan came armed with a “prepared statement” on this issue to his customary post-policy press conference and read it out word-to-word when asked whether he would be there in September-October period.
“As far as the question of me continuing in this position after September 4 goes, it would be cruel of me to spoil the fun the press is having,” said Rajan, whose three-year term comes to an end on September 3.
The Governor also said he is “intrigued” by the many letters purported to be written by him which keep coming up in the press, apparently referring to some unconfirmed reports that he was concerned about markets getting impacted by speculation surrounding his continuation as RBI chief.
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