RBI Governor Raghuram Rajan, dubbed an inflation hawk by his critics, today ruled out a blind fight against inflation, saying a single-minded focus on price rises, regardless of its consequences on growth, is not the remit of any "reasonable central bank".
"I don't want to say in any way that RBI is going to become nutters on inflation," said Rajan in his customary post-policy media interaction here.
Ruling out inflation targeting in the strict sense of the word, Rajan said the domestic context does not allow him to single-mindedly focus on inflation as growth is also a concern.
"For any reasonable central bank, while looking at achieving reasonable level of inflation it also has to take into account the growth situation, because growth itself will create some dis-inflationary forces and therefore it means you can achieve the inflation target less of an interest rate hike," he said.
Since assuming office on September 4, Rajan has hiked the key repo rate by 25 bps each on September 20 and today, taking the short-term lending rates to 7.75 per cent.
However, Rajan said the immediate focus of the central bank is to tame inflation, especially since core CPI inflation has been on the rise, which he described as really "worrisome."
He also said core CPI inflation, or price rise stripped of food and fuel, is treading at 8.6 per cent, which is not an acceptable level. This shows that consumer prices are driven more by services.
"The RBI has said it clearly again and again that it is worried about inflation. But I don't want do an inflation targeting because once you say the word inflation targeting, people have a single-minded focus on inflation regardless of the growth consequences," Rajan said in response to a query on inflation targeting.
