India's policy interest rate is appropriately set, said RBI Governor Raghuram Rajan, who has raised rates three times by a combined 75 basis points since September despite economic growth at a decade low.
"Rather than administer shock therapy to a weak economy, the RBI prefers to disinflate over time rather than abruptly, while being prepared to do what is necessary if the economy deviates from the projected inflation path," Rajan said in a speech on Wednesday.
Rajan warned against waiting to act until inflation expectations become entrenched, but also said the Reserve Bank of India would overlook temporary spikes in inflation.
"In other words, the monetary policy committee will not put on blinkers and see just the inflation number," he said.
Image: Raghuram Rajan