RBI may have done well to pause

Editor’s note: This is a reader comment we got on the article, “ Raghuram Rajan flunks his first major test, makes same mistake as Subbarao. ” As is Firstpost policy, we have lightly edited for grammar and spelling, but the comment has been left as is.

By moneymarketguy

The analysis may have been a bit too harsh.

MSF rate is petty much the operational rate at this point in time and hiking the repo rate will not achieve any significant results. We must not be too reactive to the latest data - a rate hike delayed by a month or so will not significantly alter the flow of events.

It seems irresponsible to assume pressure from the centre when RBI has time and again hiked rates when necessary and when the government was in vulnerable positions.Monetary policy is not a surgical tool, we must give our central bankers the benefit of doubt.

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In any case pricing power is so weak presently that no amount of money supply increase is going to push up inflation - and this is true not just for manufactured goods but commodities too. People stopped buying poultry because onions were too expensive!

Our propensity to spend is pretty low right now. RBI may have done well to pause - its all fine to whine about prices but where are tomorrows jobs going to come from?