Controlling inflation remains RBI priority: Raghuram Rajan

Brushing aside suggestions that the RBI has shifted focus from inflation management to growth, the central bank on Monday said fighting rising prices will continue to be its priority and a call on raising interest rates will be taken after factoring in more data.

”Nobody should doubt our desire to fight inflation and our belief that interest rates are our main tool that we have,” RBI Governor Raghuram Rajan said when asked if the central bank is now more keen to boost growth than to tame inflation.

He said the Reserve Bank will wait for the next set of data on inflation and industrial growth before taking a call on interest rates.

“We want to see data on how the work we have done so far is playing out and then we will take the next step. Don’t judge me by whether I raise interest rates in every meeting,” he said in TV interviews.

Dr. Rajan had increased the key interest rate twice by 0.25 per cent each in successive monetary polices, but refrained from hiking it further at the RBI’s December 18 mid-quarter monetary policy review despite high inflation. The repo rate is currently 7.75 per cent.

Retail inflation climbed to a nine-month high of 11.24 per cent while wholesale price inflation rose to a 14-month high of 7.52 per cent, in November. The next policy review is scheduled on January 28.

Dr. Rajan said: “Inflation targeting does not mean that you don’t keep an eye on growth because the level of growth in the economy tells you how much disinflation there is already in the system.”

He said while the RBI is targeting wholesale inflation at 5 per cent, it has yet to identify an appropriate level for inflation as measured by the consumer price index.

The government will release the next set of data on inflation and industrial growth in January.