The Reserve Bank of India (RBI) stunned the market, on Tuesday, by raisings its key policy rates by 50 basis points. The move took most by surprise, as the street expecting it to be a non-event with consensus firmly on a 25 basis hike.
The RBI signaled it would maintain a hawkish stance until price pressures show a sustained fall. Speaking exclusively to CNBC-TV18, Montek Singh Ahluwalia, deputy chairman of the Planning Commission said the higher-than-expected rate hike signals the determination of the central bank to tackle inflation. He reiterated RBI stance that the short-term measures to combat inflation will not hurt long-term growth. "I think inflation pressures are likely to ease around October," he said adding, "RBI will calibrate credit policy on the back of economic situation." RBI has been one of the most aggressive among central banks, but price pressures still remain high, driven by strong demand pressures that have spread from food to other commodities. Though, he acknowledged the persistence of inflation has been "surprising", Ahluwalia believes, the menace is still not out of control. "Oil prices are stable and I don't think there will be any further upmoves in the commodity," he said. Ahluwalia said growth in the current fiscal will certainly be less than pervious one. He expects FY12 growth to be closer to 8.2%. "I think achieving the fiscal deficit target of 4.6% will be satisfying," he said. Below is a verbatim transcript of his interview with CNBC-TV18Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
