Describing as "bold and brilliant” the Reserve Bank of India's decision to keep policy rates unchanged, Chief Economic Adviser Arvind Subramanian said it was essential for monetary policy to not react to the ups and downs of transient phenomena.
Speaking to reporters, Subramanian said inflation and growth were not the only underlying cause behind RBI's decision. The central bank had to factor in the extra pressure and volatility in the foreign exchange market before making a decision.
Keeping the repo rate unchanged will ensure stability for the market, he affirmed.
According to Economic Affairs Secretary Shaktikanta Das, the RBI's decision was based on its assessment of the downward pressure on inflation. The central bank also considered the uncertainty of a U.S. Federal Reserve rate hike, he added.
Das expects banks to pass on previous rate cuts to borrowers due to the surge in cash deposits.
Read: What Economists And Brokerages Made Of RBI's Surprise Rate Decision
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