Won't keep markets guessing, says RBI

In keeping with the tone of the first quarter monetary policy review, Reserve Bank of India (RBI) Governor D Subbarao has told top officials of the central bank that policy communication hereafter would ensure that markets aren’t kept guessing about the central bank’s moves.

Subbarao spoke to senior officials of the central bank at the bank’s central office on July 29 in a special address to mark the Diamond Jubilee year.

Some analysts said Subbarao’s stand is in slight contrast to the reputation his predecessor Y V Reddy had earned for his penchant for keeping the markets guessing.

In fact, Reddy himself had quipped that he was always surprised by the market’s surprise at the central bank’s stance or measures during his tenure.

Reddy had several times flagged issues relating to the extent of clarity a central bank can offer on its policies. He flagged a debate on predictability and “credibility bonus” of a central bank and the consequent impact on asset prices.

Some RBI officials opined that this seeming shift in stand was a practical one, especially in the time of high uncertainty.