RBI monetary policy: Three key takeaways
RBI’s monetary policy committee has essentially said it will wait for data on the impact of demonetisation, rather than be swayed by popular anecdotes or market pressure
There are three main takeaways from the latest monetary policy announced by the Reserve Bank of India (RBI), which came amid mounting criticism of the central bank.
First, its monetary policy committee has essentially said that it would rather wait for data on the uncertain impact of the ongoing currency exchange on the economy rather than be swayed by popular anecdotes or pressure from the financial markets.
Second, the decision to not cut policy rates has surprised most analysts. The decision to focus on inflation risks despite the lowering of the economic growth forecast comes at a time when the autonomy of the Indian central bank has been questioned by critics. Such a decision is unlikely to have been taken in New Delhi.
Third, governor Urjit Patel—under fire for his reticence—did well to dismiss the hope that there would be a fiscal bonanza if some of the liabilities of the central bank would be extinguished. He reiterated that the RBI would honour the promise made to the public on every banknote.
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