The Reserve Bank brass took to ornithology to explain its policy stance and its intents as it took everyone by surprise with a rate hike on Tuesday.
"We are neither hawks, nor doves. We are actually owls," Governor Raghuram Rajan said eliciting loud laughter at the customary post-policy press conference in .
He was answering a question on the self-contradiction in the RBI's third quarter monetary policy, which is hawkish in its stance as it unexpectedly raised rates, but dovish in its guidance because of indications of a pause.
"An owl is traditionally a symbol of wisdom. So we are neither doves (nor hawks)...but owls, and we are vigilant when others are resting," Deputy Governor in charge of monetary policy, Urijit Patel elaborated.
"The broad point is that don't try and put us into buckets. We are doing what is necessary for the economy," Rajan chipped in again.
Raghuram Rajan defended the move saying a rate cut would not have impacted either banks or borrowers and that bringing down retail prices is the key to sustainable growth.
"If we cut policy rates, it won't have any impact on banks' cost of funds or lending rates for borrowers," Rajan told reporters.
"Consumer price inflation is too high, we need to bring it down...and we should be able to reach the 8 per cent objective by end of the year with this rate hike," he added.
When asked why the monetary policy action is hawkish but the guidance is dovish, Rajan said, "We are neither hawks nor doves. We are owls keeping a vigil when everyone else is resting."
Rajan said there was a need to create an environment for economic recovery to be strong and that inflation was a part of it. "I'm not in any way giving up on growth in coming months or quarters and that RBI is cognisant of the weak state of economy," he said.
The best way to sustain growth over medium term is to bring inflation down to a tolerable level during the course of the year. This will give the RBI more room to take policy action later and that will help growth, he said.
The RBI Governor said disinflationary factors must be taken into account in a weak economy, and focussing on retail inflation will "hasten path of disinflationary pressure."
On the external sector threats, he said the economy is far better prepared now to face any risks, and attributed the recent rupee volatility to outflows of short term funds from the debt market.
On whether the RBI has accepted the Urjit Patel committee recommendations on inflation targeting, he said: "It is premature to say the RBI is moving towards inflation targeting. We've not accepted Patel committee's inflation target.
"The central bank is studying the recommendations of the Patel panel on monetary policy and complete implementation of its report will need a dialogue with the government."
Rajan also denied that the recall of the pre-2005 currency notes was an attempt at demonetisation and preventing black money or curbing tax evasion, and said it is aimed at reducing counterfeiting.
