FXStreet (Mumbai) – Speaking at a conference in Mumbai on Monday, the day when Asian and Australian markets saw further sharp declines, Reserve Bank of India (RBI) Governor Raghuram Rajan said that it is not a role for central banks to give “booster shots” to stock markets.
Key Quotes:
“It is not the role of the central bank to elevate sentiments unduly, to deliver booster shots to the stock market so that it can soar for a while, only to collapse when reality hits.”
“We do not have to look far beyond our borders to see the consequences of such boosterism.”
“We will have no hesitation in using our reserves when appropriate to reduce volatility in the rupee.”
“Once market volatility settles down, India should emerge once again as an investment destination of choice.”
India also saw a heavy sell-off on Monday as the Sensex index in Mumbai fell 4% and the Indian currency, the rupee, lost 1%.
On monetary policy stance, the RBI uses a number of inflation models and doesn’t rely on a “seat-of-the-pants approach” to setting its monetary policy.
“I want rate cuts to not be seen as goodies that the RBI gives out stingily after much public pleading,”
“Rate cuts are a natural consequence that I can assure you the RBI will have no hesitancy in delivering once we can be assured of low inflation.”
(Market News Provided by FXstreet)