- RBI Governor Raghuram Rajan will chair his last policy meeting today
- Dr Rajan is likely to hold the key repo rate steady at 6.5%
- A rate cut is unlikely because inflation is hovering at a 2-year high
Reserve Bank Governor Raghuram Rajan is likely to hold the key repo rate steady at 6.5 per cent in his final monetary policy announcement today, according to a majority of economists. Though Dr Rajan loves to surprise markets, the chances of a repo rate cut today are slim as retail inflation is hovering around a two-year high, experts say.
But investors are keenly awaiting Dr Rajan's commentary on the economy in what could be his last press conference as RBI chief. 53-year-old Dr Rajan can stake out what needs to be done for India to win its long war against volatile inflation.
Inflation is a long way below the double digit levels prevailing when Dr Rajan was appointed in 2013, but at 5.77 per cent in June, it was near the top of the RBI's 2-6 per cent range, and above the near-term target of 5 per cent by March next year.
Dr Rajan, dubbed as an inflation warrior by many, has cut the key rate repo by 150 basis points since January last year to a five-year low. But when he walks away on September 4 to return to academia in the US, Dr Rajan will be relieved that the government has formally adopted the retail inflation targets he had set.
Among Dr Rajan's legacy would be a yet-to-be-formed monetary policy committee that will decide on interest rates in the future.
Dr Rajan is also likely to stress the need to keep the RBI's focus on cleaning up bad loans in the banking sector, so that lenders can once again support investment needed to push growth.
He may also focus on faster transmission of rates across the banking system, measures for which were announced in April.
The government has much to thank Dr Rajan for. He steered the rupee off record lows three years ago and has managed to tame stubbornly-high inflation plaguing the common man.
Economists hope that his successor will follow through on the strategies laid out by him.
(With agency inputs)
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