Reserve Bank of India (RBI) is keeping the nation guessing on prospects of an interest rate cut in the mid-quarter review of monetary policy scheduled for December 18 by giving mixed signals on inflation, which determines the central bank's stance.
Deputy governor Subir Gokarn on Saturday said inflation continued to be primary concern for the central bank. But only two days earlier, governor D Subbarao said he expected inflation to come down from January and will consider the growth-inflation trajectory in framing monetary policy - which suggested a benign expectation.
Speaking at an event in Mumbai, Gokarn said that RBI should not do anything that provide some short-term stimulus to growth that would raise the risk of longer term inflation. "One action is not necessarily going to make the difference. But there are risks associated as well" he said, underlining that inflation was a critical concern.
Subbarao said in Kolkata on Thursday after the central board meeting of RBI that: "We are expecting that inflation will trend down starting the fourth quarter. As we go into our mid-quarter policy on December 18 and the quarterly policy on January 29, we will take into account the growth-inflation trajectory and calibrate our monetary policy accordingly."
He said: "Growth has moderated certainly. Growth has come down from 8.5% and 6.5% in the last two years respectively to 5.5% and 5.3%."