But policy stance change from neutral to tight is perhaps not the right move
RBI's projection for inflation for H2 of 2018-19 was lowered to a range of 3.9% - 4.5% from 4.8%, while the projection for the economy's growth rate was left unchanged at 7.4%.
Note that since the third bi-monthly monetary policy statement in June, inflation trended downwards in July and August to 4.17% and then 3.69%, the two data points RBI had before the fourth monetary policy statement on Ocotober 5th. (Since then the September inflation number has come further lower at 3.77%.)
My perception has been that there was no need for the RBI to have raised the repo rate by 0.5% in two steps in June and August this year. Please read my earlier blogs on this subject.
RBI's new policy stance means in Governor Patel's own words is that "there are only two options in this particular rate cycle, either we increase rates or keep them steady".
I had felt that the shift in RBI's stance from accommodative to neutral in February last year was too early, and the wrong signal then.
RBI's projection for inflation for H2 of 2018-19 was lowered to a range of 3.9% - 4.5% from 4.8%, while the projection for the economy's growth rate was left unchanged at 7.4%.
Note that since the third bi-monthly monetary policy statement in June, inflation trended downwards in July and August to 4.17% and then 3.69%, the two data points RBI had before the fourth monetary policy statement on Ocotober 5th. (Since then the September inflation number has come further lower at 3.77%.)
My perception has been that there was no need for the RBI to have raised the repo rate by 0.5% in two steps in June and August this year. Please read my earlier blogs on this subject.
RBI's new policy stance means in Governor Patel's own words is that "there are only two options in this particular rate cycle, either we increase rates or keep them steady".
I had felt that the shift in RBI's stance from accommodative to neutral in February last year was too early, and the wrong signal then.
