No change in inflation goalposts, CPI to be in focus: Rajan

Last Updated: Tue, Jan 28, 2014 17:02 hrs

Mumbai: Reserve Bank Governor Raghuram Rajan today said the 25 basis point repo rate hike will help rein in consumer price rise at under 8 per cent by next January and denied speculation that the goalposts have been shifted to retail inflation and inflation targeting has been adopted.

"We should be able to reach the 8 per cent objective (on consumer price inflation) by the end of the year with this rate hike, which in turn will aid sustainable growth in the long term," Rajan told reporters at the customary post-policy interaction.

The Urjit Patel Committee on monetary policy framework set a retail inflation target of 8 per cent by January 2015. The panel's recommendations include shifting the goalposts to consumer price inflation and inflation targeting.

Rajan, however, denied that the RBI has adopted any of the suggestions formally and said it will have to be done in consultation with the government. He added that CPI inflation at 8 per cent is a very "reasonable" target.

"It is premature to say that we are moving towards inflation targeting," he said, adding the committee's recommendations are being studied.

He said the RBI had been focusing on both the consumer price index (CPI) and wholesale price index (WPI) inflation numbers for some time now and feels the CPI component is important because of its direct correlation with the consumer, who is getting affected the most and needs to be protected.

Rajan said the RBI has to focus on disinflationary pressures in a weak economy.

"The 25 bps increase in the repo is needed to set the economy securely on the recommended disinflationary path," Rajan said.

More from Sify: