October 5, 2016

Patel’s Big Day Out Signals Abrupt Shift From Rajan’s Era

It was meant to be independence day for India’s central bank. It might instead be viewed as mission accomplished for Prime Minister Narendra Modi’s government.

With a new governor at the helm of a newly-minted Monetary Policy Committee, the bank had the opportunity Tuesday to buttress the autonomy over interest-rate decisions that former leader Raghuram Rajan fought for. With the economy growing in excess of 7 percent, most economists predicted no change in the benchmark.

Instead, Reserve Bank of India Governor Urjit Patel surprised many with a rate cut, signaling that faster expansion has become the priority even as inflation remains stubbornly higher than in the rest of Asia. Three government-appointed economists and two RBI colleagues joined Patel in a 6-0 vote in favor of the quarter-point move. They acted hours after a top bureaucrat highlighted the government’s view that inflation is receding.

Read more at http://www.bloombergquint.com/business/2016/10/04/patel-s-big-day-out-signals-abrupt-shift-from-rajan-s-stormy-era

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