Raghuram Rajan defends rate hike move, says RBI a vigilant owl not a dove

The Reserve Bank of India (RBI) Governor 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 Mumbai.

He was answering a question on the self-contradiction in the central bank'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.

He cited the last policy's experience as a case, saying it was decided to hold on because of the RBI's focus on being vilgilant.

"I think the last time we wanted to say we were vigilant but waiting for more data flows. That meant we didn't act but we wanted to convey the signal that we were ready to act," he said.

Rajan assured that over a period of time, once inflation cools, the RBI will have more room to cut interest rates and may also advance the rate cuts if the inflation cools faster than expected.