Reserve Bank of India (RBI) Governor Raghuram Rajan finally hinting for a rate cut has said that inflation has come down to the comfort zone quicker than expected and he is keeping a watch on data to see how much room is there for further easing of the monetary policy. He said that we are on a phase of accommodation and are looking at the data to see what more room we have.
Talking at an economic symposium Jackson Hole, Wyoming, Rajan said that “You know, like other central banks, we are in a wait-and-watch mode. And as the incoming data are analysed, we are looking to see how much monetary room there is for more accommodation.” He further said that our primary focus is on the inflation outlook. That’s helped by a good monsoon. It’s helped by lower commodity prices. And, you know, it’s hurt by a significant exchange-rate depreciation.
Though, the central bank governor said that his remarks should not be construed as an indication of what the RBI may do at the next monetary policy meeting, but said that we will strive to give you the lowest interest rates that is consistent with our effort at bringing inflation under control.
Rajan said that 'Rate cuts should not be seen as goodies that the RBI gives out stingily after much public pleading. Instead, what is important is sustained low inflation. After cutting its repo rate by 75 basis points this year, the RBI kept the rate on hold at its last policy review. Rajan also stated that he has reached an agreement with the government on a new monetary policy committee that largely meets the goal of transitioning from a system where the governor alone is responsible for decisions in order to insulate it from outside pressure.
