The reverse repo rate was also raised by 25 basis points, to 6.25 per cent.The Reserve Bank of India on Wednesday raised interest rates for the second straight meeting, but retained its "neutral" stance as it aimed to contain inflation while not choking growth.
Here are some of the comments made by RBI Governor Urjit Patel and Deputy Governor Viral Acharya at a news conference after the monetary policy announcement:PATEL ON RETAINING NEUTRAL STANCE"Many of the risks that we have cited, which informed our projections, are on both sides.
That's why we have said that these projections are against the backdrop of balanced risks.Secondly, there is a fair bit of uncertainty around CPI prints going forward.
Therefore, it was important that we kept our options open, depending on the prints coming over the next few months, given the volatility of the prints that seem to be coming most of the time."PATEL ON MAINTAINING FINANCIAL STABILITY AMID GLOBAL RISKS"We've already had a few months of turbulence behind us and it looks like that this is likely to continue.
For how long, I don't know.
The trade skirmishes evolved into tariff wars and now we are possibly at the beginning of currency wars.Given this, we have to ensure that we run a tight ship on the risks that we control to maximise the chances of ensuring macro-economic stability and continuing with the growth profile of 7-7.5 percent going forward.We do have things that are in our favour, which you're aware of, and if we continue along that path, we ensure that we don't add to the global risk profile that would adversely affect us."PATEL ON RAISING RATES"The main reason for changing the policy rate is to ensure that, on a durable basis, we come to and maintain the 4 percent target."We have been away from the 4 percent number for several months now.
We took two steps - once in June and once in August - to maximize our chances that we don't drift away from 4 percent and, in fact, we move towards 4 percent on a durable basis.
So, it's based on the objective that has been given, the data prints, and our projections going forward."ACHARYA ON LIQUIDITY"Though the growth in currency-in-circulation has moderated to some extent recently, it's expansion remains above historical trend reserve money growth is expected to pick up in the second half of FY18.
It's usually coincident with the start of the festive season."RBI will continue to actively manage the system liquidity so as to achieve the monetary policy objective of aligning the overnight weighted average call rate with the policy rate while meeting economy's demand for reserve money growth.
Evolving liquidity conditions will determine our choice of specific instruments for transient and durable liquidity management."PATEL ON CORE CPI INFLATION"Our mandate is to target the headline.
Therefore, while we look at the components that make up the headline our focus in terms of the policy choices is to get the headline to 4 percent or thereabouts.
So, while it gives us information - you know it's not just core, there's core core and many others as many as people want - our legistated target is on CPI headline and our policy is oriented to keep that at 4 percent." Thomson Reuters 2018(Except for the headline, this story has not been edited by TheIndianSubcontinent staff and is published from a syndicated feed.)