The appointment of Urjit Patel as the next RBI Governor signals government’s preference for policy continuity and commitment to low inflation, says Japanese financial services major Nomura.
“The government’s decision to promote the existing RBI deputy governor signals its preference for policy continuity and commitment to low inflation, and it is a move that will be seen as protecting the RBI’s independence,” it said.
Ending a long speculation, Urjit Patel, a Deputy Governor at the RBI, was yesterday named as the next chief of India’s central bank to succeed outspoken Raghuram Rajan, whose tenure was marked by tough measures to control inflation and headline-making statements.
While Patel has been officially appointed RBI Governor with effect from September 4, his first working day will be two days later because of 4th being Sunday followed by a holiday for Ganesh Chaturthi on 5th.
Talking about the possibility of rate cuts, it said, “With two of the six MPC (Monetary Policy Committee) members (Urjit Patel, Michael Patra) on the hawkish side and given the governor has the deciding vote in the case of a tie, we reduce the probability of a rate cut in Q4 to 55 per cent from 65 per cent.”
The next monetary policy review is on October 4. Further, it said that the Patel’s appointment was surprising because “he is generally viewed as hawkish, which may dash hopes of aggressive easing, and rightly so, in our view”. “However, we expect investors to view his appointment positively as it reaffirms the RBI’s independence,” it added.