A 'Good' Budget Will Help In Disinflation, Allow Rate Cut: RBI
"We would want to have stable monetary policy. To the extent that we find the substantial amount of room builds up before the interim target (of CPI) is reached, the question would then be should we cut tremendously now but then run the risk of not reaching the final target, and the general intent would be a smoother process.
"However, to the extent that we have substantial room that builds up, that would prevent any further hikes in the anticipate, and that would be useful," Rajan said.
RBI-appointed Urijit Patel panel, in its report, has set CPI target of 8 per cent by 2015 and 6 per cent by 2016.
The apex bank has tried to forecast consumer price index and is setting interest rates with idea that it would achieve a certain level of CPI at a particular time, he said.
"Which means that we are willing to look through the transient increases in CPI or transient decline in CPI, once such transient decline could be because of base effect. We are willing to look through these with the view of achieving a medium-term goal that we have set," Rajan said.
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