RBI has no bias either to  cut or hike rates: Raghuram Rajan

With food inflation buffeting retail inflation, RBI Guv says the country should focus on aspects like cold storage facilities, improving the logistics and finding newer market places for the produce to reduce the seasonal volatility in prices

Mumbai : The Reserve Bank has no bias either to cut or hike the key rates and the direction of the monetary policy will be influenced entirely by data, Governor Raghuram Rajan said on Wednesday.

“Our policy stance today is reasonable and we see no reason to alter it today based on the information we have. As data comes in, we will have a better view and will adjust accordingly. So, I should not presume that we are either biased towards raising rates or cutting rates at this point,” he said at the customary post-policy analysts call. After choosing to hold the rates, Rajan had said that risks for achieving 6 per cent inflation target for retail inflation by January 2016 have reduced over the last two months.

Consumer Price Index or retail inflation cooled down to 7.8 per cent in August, below the 8 per cent target set for January 2015 as part of the RBI’s glide path.

Meanwhile, on the corporates’ overseas debt, Rajan said that there was a need for companies to look at hedging from the financial perspective and hedges should not placed like bets assuming a single direction for the

currency to move in.

Raghuram Rajan said the cap on foreign portfolio investments in the government debt will be increased in a “steady” and “measured” manner.     “We want a steady increase in limits, a measured increase so that we understand what is happening and we see the market develop as these limits are increased. We do think FPIs are extremely important to market development,” he told analysts.

With FIIs reportedly exhausting over 95 per cent of the USD 25 billion investment limit in government debt, Rajan hinted that there is no need to increase the limit immediately. “As short-term debt rolls over, that frees up more space in government bonds and so it’s not as if that space is completely shut out and over time we will re-examine and see what we can do,” he said.

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