Economy

RBI move reflects commitment to price stability: Rangarajan

KR Srivats New Delhi | Updated on March 12, 2018 Published on January 28, 2014

C. Rangarajan, Chairman, Economic Advisory Council to PM. Photo: Kamal Narang

The RBI’s move to hike repo rate by 25 basis points did not come as a surprise and clearly reflects the central bank’s commitment to price stability as the dominant objective of monetary policy, a top policymaker said.

This is also a reflection of the shift in focus of the Reserve Bank of India from wholesale price inflation to retail inflation, C Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council, told Business Line after the RBI policy announcement.

WPI, Retail inflation

While the wholesale price inflation had softened to a little over 6 per cent recently and came close to the RBI’s comfort zone, the retail inflation at close to 10 per cent was not at an acceptable level, Rangarajan said.

Monetary tightening

Rangarajan saw the latest repo rate hike as the end of the rate hike cycle. The RBI guidance has conveyed that if inflation were to trend down along projected lines, there won’t be a need for further monetary tightening. The central bank has taken a view that there is a tendency for inflation to come down in the coming months.

Published on January 28, 2014
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