Has Rajan subtlety hinted at no more rate cuts?

He may not have said it but did he say it?

Central bank governor Raghuram Rajan, in its second bi-monthly monetary policy statement of this year, kept the repo rate cut unchanged.

The policy was in line with the analyst expectations but RBI’s fear of inflation may have exposed more than What Rajan could have wanted. Rajan said that the inflation surprise in April reading makes the future trajectory of inflation somewhat more uncertain.

Retail inflation, or consumer price index (CPI), rose more sharply than expected due to a more-than-seasonal jump in food prices in April. 

What’s to note is the fact that inflation has bypassed RBI's 5% projections, by rising at 5.4% in April from 4.8% in March.

Apart from food inflation, fuel stretched upward in April, mainly boosted by prices of petrol and diesel which embedded in transport and communication. Clothing and footwear also submitted an increase in inflation. Services inflation remained elevated on account of house rents, water charges, tuition fees and taxi/auto fares.

Excluding petrol and diesel from this category, inflation was sticky and above 5%. However, since growth in rural wages and corporate staff costs have been modest, cost-push factors may be subdued for the time being. 

Trimming of rates in the third bi-monthly policy statement which is to be held on August 9, now looks foggy.

According to analysts, once RBI gets a clear view on monsoons, RBI might lower the rates.

However, concerns mount up as RBI continues to figure out ways to attain 5% inflation target set for January 2017. According to reports, inflation is likely to increase further, some economists even fear it might go beyond the RBI's estimates for next year. 

Rajan, told media persons in Mumbai on Tuesday, “Will have to figure out ways to attain 5% inflation target set for Jan 2017.”