RBI will be able to change policy stance only if inflation cools down: Rangarajan

 

At its last policy meeting in September, the RBI left a section of India Inc and the markets disappointed with its decision to not cut the bank rate despite reducing the Cash Reserve Ratio by 25 basis points.

 

The industry’s hopes for a rate cut were high at that time as the government had reversed its no-reforms stance by announcing a series of big-bang reforms – from a hike in the price of diesel to foreign direct investment in multibrand retail and aviation. However, the RBI did not change the bank rate keeping the high inflation rate, at 7.55 per cent in August 2012, in mind.

 

Earlier in the day, RBI deputy governor Subir Gokarn said the central bank cannot lose sight of managing inflation and that the bank will review how the domestic and global scenario will affect growth in its efforts to achieve a balance between growth and inflation.  The RBI’s anti-inflation stance may affect growth in the short run, he said.