Reserve Bank of India (RBI) chief Raghuram Rajan said the central bank had decided to keep rates on hold even before the high consumer price and retail inflation data for November were released. Rajan was speaking to ET NOW television channel in an interview.
Earlier this month, the RBI surprised investors by keeping interest rates on hold despite data showing consumer prices in November posted their biggest annual rise on record-11.24 percent-while wholesale inflation hit a 14-month high.
Brushing aside suggestions that the RBI has shifted focus from inflation management to growth, the central bank 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. Nobody should doubt that," said RBI Governor Raghuram Rajan 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 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.
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 its 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 in November, while wholesale price inflation rose to a 14-month high of 7.52 per cent last month. The next policy review is scheduled on January 28.
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.
-With PTI inputs