Comfortable with current level of Inflation, says Rajan
Rajan expressed apprehensions that headwinds to growth from domestic constraints continue to pose downside risks.
Zee Media Bureau
New Delhi: Reserve Bank Governor Raghuram Rajan on Tuesday said that the RBI is comfortable with the current level of inflation given the economic conditions.
Rajan also added that RBI doesn't see liquidity conditions as tool to fight inflation.
Rajan said that in emerging and developing economies, the prospect of delay in the taper of the Federal Reserve’s bond purchases has brought calm to financial markets, and capital flows have resumed.
Rajan has however expressed apprehensions that headwinds to growth from domestic constraints continue to pose downside risks, and vulnerabilities to sudden shifts in the external environment remain.
Rajan was speaking during the RBI second quarter monetary policy review today. RBI today hiked the repo rate by 0.25 percent to 7.75 percent, slashed the Marginal Standing Facility (MSF) rate by 0.25 to 8.75 percent. The RBI has left the Cash Reserve Ratio (CRR) unchanged at 4 percent.
“Strengthening export growth and signs of revival in some services, along with the expected pick-up in agriculture, could support an increase in growth in the second half of 2013-14 relative to the first half, raising real GDP growth from 4.4 percent in Q1 to a central estimate of 5.0 percent for the year as a whole,” Rajan said.
He said that notwithstanding the expected edging down of food inflation, retail inflation is likely to remain around or even above 9 percent in the months ahead.