Rising inflation to blame, say bankers

Mumbai, December 5 

Bankers were surprised at the RBI hitting the pause button despite a steep fall in growth, and opined that inflation seems to have been fore-grounded by the rate-setting panel’s unanimous decision.

SBI chairman Rajnish Kumar termed the status quo policy as an “unanticipated policy surprise”.

He, however, said this is the “most appropriate” move as monetary policy works with a lag when it comes to transmission. The steep reduction in growth estimate for the current year to 5% and lower forecast for the next is indicative of a slow recovery, he added.

HDFC Bank’s chief economist Abheek Barua said, “Clearly, the RBI has responded to hardening inflation and rising inflation expectations.”

Kotak Mahindra Bank’s Shanti Ekambaram also said the transmission process is likely to improve further, but added it is “interesting” to see the pause call was unanimous for the six-member panel. “Inflation and fiscal deficit trajectory will probably be the guiding force for future rate decisions,” she said. — PTI