RBI’s Rajan Keeps Rates Unchanged
In line with expectations, Reserve Bank of India (RBI) governor Raghuram Rajan on Tuesday kept both repo rate and cash reserve ratio ( CRR) unchanged. Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5 per cent by the end of 2016-17,” Rajan said while explaining the policy stance in the RBI’s statement. Going forward, under the assumption of a normal monsoon and the current level of international crude oil prices and exchange rates, inflation is expected to be inertial and be around 5 per cent by the end of fiscal 2016-17,” Rajan said in the statement. However, the implementation of the VII Central Pay Commission award, which has not been factored into these projections, will impart upward momentum to this trajectory for a period of one to two years. The Reserve Bank will adjust the forecast path as and when more clarity emerges on the timing of implementation. Inflation has evolved closely along the trajectory set by the monetary policy stance, he said, adding that with unfavourable base effects on the ebb and benign prices of fruits and vegetables and crude oil, the January 2016 target of 6 per cent should be met.