Monsoons critical for RBI policy

Mumbai: The southwest monsoon, which hit the mainland a bit late on Friday is a “crucial variable” for monetary policy, British brokerage Barclays said on Friday and projected retail inflation would be below 8 per cent if official rain forecasts come true.

Such an eventuality will help give the RBI, which is targeting to rein in retail inflation at 8 percent by January next, greater room for a “balanced monetary policy stance”, it said.

“For the RBI, the monsoons will be a crucial variable in calibrating monetary policy, as the rains will have implications for both inflation and growth,” it said in a note.

The monsoon, which generally hits the southern coast on June 1, made a landfall at the Kerala coast earlier on Friday.

The Met Department has said the rains will be 95 per cent normal this year and it is likely to revise its estimate later this month according to the movement of the rainfall. “We expect retail inflation-the RBI’s key focus at the moment — to be in a low 7 percent handle, on average, in FY15,” Barclays said.