The Reserve Bank of India is expected to take into account the current inflation and the forex market situation before firming up its monetary policy stance, Rangarajan, Chairman to the Prime Minister’s Economic Advisory Council, has said.

The new RBI Governor, Raghuram Rajan, is due to review the monetary policy on Friday, his first after he assumed charge on September 5.

"I don’t want to comment on interest rates. But the RBI will factor in the inflation and forex market situation before deciding its stance on September 20," Rangarajan said when asked about upcoming RBI monetary policy review.

Rangarajan’s remarks on the RBI's likely approach came on a day the wholesale price index based inflation hit a six-month high in August, higher than the 5.79 per cent in the previous month.

The central bank is expected to continue with its current monetary policy stance with elevated short-term rates, said Shubhada Rao, Senior President & Chief Economist, YES Bank.

Asked about his expectations of the US Fed taper announcement, Rangarajan said that the impact of tapering has been digested and that the market has already reacted.

"The timing will be difficult to decide, but their (US Fed) direction is already clear," Rangarajan told Business Line when asked if he expects deferral of the taper in the wake of somewhat weaker than anticipated unemployment data.

Meanwhile, Lawrence Summers, who was Obama’s top economic advisor in his first term, has withdrawn his name from Obama’s list of candidates to succeed Federal Reserve Chairman Ben Bernanke.

(This article was published on September 16, 2013)
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