Mumbai, Oct 31 (PTI): Reserve Bank of India (RBI) Governor Raghuram Rajan tried to allay fears of consumers and industry after increasing key rates twice in less than six weeks, saying the central bank may be done with the hikes for now.
Since taking over at RBI on September 4, Rajan has twice hiked the repo rate - at which the central bank lends to banks - to 7.75 per cent, seeking to tame inflation. The rate went up by 25 basis points each on September 20 and October 29.
"We think we have done enough on rate hikes given what we know about the economy to wait and watch and see what happens," Rajan told analysts in a customary post-policy conference call.
He said the RBI does not have a target interest rate. "I won't say that we have a set of rate hikes in mind. It is not that we are trying to take baby steps towards some longer-term interest rate goal that we have in mind," he said.
A better way of describing what the RBI is doing on interest rates is that "when there is lot of uncertainty, you may move a little less than what everybody thinks may be necessary... and also because there are forces that you can't quite estimate which may come in and help or hinder your effort," Rajan said.
The RBI has increased its estimate for wholesale price inflation to over 6 per cent and consumer price inflation to over 9 per cent for the end of the financial year.
On the rupee, Rajan said he would consider the local currency to be stable only when dollar demand from oil companies returns to the market. Oil companies currently have a special swap window provided by the central bank to meet their dollar requirements, a facility that Rajan said would be tapered gradually.
The governor said the central bank does not have any value for the rupee.
RBI on Tuesday calibrated the window between the repo rate (7.75 per cent) and marginal standing facility (8.75 per cent) to 100 basis points, as stated in the September 20 mid-quarter review.
"Once there is adequate liquidity, the price of money in some sense will move down from the MSF to the repo very quickly," Rajan said.