RBI expects inflation to be around 5%; doesn't factor in 7th Pay Commission award

Raghuram Rajan said that it would broadly be not fair to say that the RBI has become more hawkish over time.

Zee Media Bureau

New Delhi: RBI Governor Raghuram Rajan on Tuesday said that Inflation has evolved closely along the trajectory set by the monetary policy stance.  

Reserve Bank kept the Repo rate unchanged at 6.75 percent in its bi-monetary policy announcement. The RBI has also kept the Cash Reserve Ratio( CRR) unchanged at 4 percent. The Reverse Repo Rate also remained the same at 5.75 percent.

With  unfavourable  base  effects  on  the  ebb  and  benign  prices  of  fruits  and  vegetables and crude oil, the January 2016 target of 6 percent should be met, he added.

Rajan said that under the assumption of a normal monsoon and the current level of international crude oil prices and exchange rates, inflation is expected to be inertial and be around 5 percent by the end of fiscal  2016-17.

However, he said, the implementation of the 7th Central Pay Commission award, which has has not been factored into these  projections.

Since September we had some imformation on the (7th ) Pay Commission award. We can look through some aspects of the Pay Commission while some we can't,” added Rajan

He, however said that it would broadly be not fair to say that the RBI has become more hawkish over time.