No political Influence in annual policy: Reddy

By agencies   |   Thursday, 20 April 2006, 07:00 Hrs
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MUMBAI: Brushing aside speculation that political considerations influenced monetary policy, Reserve Bank of India Governor, Y V Reddy, said financial market expectations were key to drafting the credit policy.
He said, “We have observed that economic cycles may not have much to do with political cycles. For monetary policy, financial market expectations are more important.”

The central bank did not trifle with the short-term rates in its slack season credit policy for 2006-07 as a step towards sustaining the current growth momentum. It had hiked short-term lending rates in the quarterly review of the monetary policy for 2005-06 in January by 0.25 percent, in turn triggering hike in retail loan rates. “Monetary policy deals with financial market much more now than it did 15 years ago," Reddy said.

He claimed that the outcome of the monetary policy stances had been "particularly impressive," which is bright in terms of current sturdiness of the manufacturing and services sectors and the health of financial stability. There is a considerable development in State's fiscal deficits, he added.

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