Rajan sees policy stripped back to signalling function

Raghuram Rajan, Reserve Bank of India

Monetary policy in India is likely to operate primarily through a signalling channel for some time, Reserve Bank of India (RBI) governor Raghuram Rajan said today, as the central bank kept rates on hold.

In his monetary policy statement, Rajan said there had been "weak transmission" of recent falls in money market rates into bank lending rates.

This suggests shifts in monetary policy will "primarily have signalling effects for a while," he said, though he emphasised they could still have a power

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