Blames monsoon, banks; hints at rate cut in 2 months
RBI governor Raghuram Rajan
Mumbai: Home loan borrowers would have to wait some more time for their EMIs to come down as RBI governor Raghuram Rajan kept key monetary policy rates unchanged.
A further rate cut would depend on a fuller transmission by banks of the RBI’s front-loaded rate cut of 0.75 per cent since January 2015; development in food prices and its management specially if there are continued weather shocks; continuation and even acceleration of policy efforts to unclog the supply side to make available key inputs like power and land; and signs of normalisation of the US monetary policy.
He sent out a signal to the banks to reduce rates by September or October as the effect of the 75 basis points rate cuts he announced since January this year kicks in after a lag.
He also saw inflation risks reducing and reduced the target of inflation by 0.2 per cent at 6 per cent for January-March 2016. However, on the economy side, he cautioned that though the number of stalled projects had reduced, supply side constraints remained and new investment demand from the private sector and government remained subdued. The target for GDP growth has been retained at 7.6 or cent.
Dr Rajan said that the environment for keeping inflation under check was favourable though the most worrying was the sustained hardening of inflation excluding food and fuel.
RBI, finmin agree on rate panel
RBI governor Raghuram Rajan seemed to have brushed aside the heated opposition to the constitution of the seven-member monetary policy committee (MPC) and the issue of the governor having the veto power over the MPC’s advice.
Addressing a post monetary policy news conference, he said, having a monetary policy committee with seven members was vital commentary on the monetary policy committee as the government has given RBI a clear inflation mandate.
There are three virtues of taking the decision away from the governor and giving it to a committee, he said. First, a committee can represent different viewpoints and studies show that its decisions are better than that of an individual.
Second, it reduces the internal and external pressure that falls on an individual and lastly its continuity, when any single member changes. On the draft IFC proposals, he said, “we have been enthusiastic supporters of a committee. We have been engaged in dialogue with the government.”
He added that “while details have to be ironed out, there are no differences.”
The governor’s conciliatory tone seems in contrast to the outburst against the government’s move to clip the veto power of the Reserve Bank governor over the proposed monetary policy committee’s decisions.
( Source : deccan chronicle )
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