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| Top RBI official turns loose cannon |
| Newswire18 / New Delhi Jul 30, 2010, 00:48 IST |
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 Central bank mandarins are almost always taciturn, mostly withdrawn, reticent, and at worst, measured with what they speak, as any unintentional slippage can wreak havoc in the financial markets.
So, when a top Reserve Bank of India (RBI) official poured his heart out on Mint Street's policy stance in front of reporters, a wave of shock, anger and awe ran through the markets.
Making a strong case for more aggressive rate hikes, the official said the current interest rates were woefully low if RBI was serious about taming inflation.
“With RBI injecting liquidity at 5 per cent and inflation being at 10 per cent, they will never be able to control inflation, everything else remaining the same,” the official, who declined to be identified, said.
The remarks came just two days after Governor D Subbarao raised the repo rate by 25 basis points (bps) to 5.75 per cent and the reverse repo rate by 50 bps to 4.50 per cent.
The 10-year bond fell by about 35 paise to Rs 100.05, though it partially recovered later in the session.
But who was this official targeting?
There have been some murmurs that the RBI indeed wanted a tougher rate action, but was shown the red flag, as the government feared a stronger dose of rate hikes could hurt growth prospects and make a rather arduous borrowing plan costlier and more difficult.
So, while the policy document and on-record comments by RBI officials were very much in sync with the policy stance, Thursday’s off-the-record barbs could be meant to set the record straight.
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