Brushing aside speculation that political considerations influenced monetary policy, Reserve Bank of India Governor Y V Reddy said on Wednesday financial market expectations were key to drafting the credit policy.
"Over the years, we have observed that economic cycles may not have much to do with political cycles. For monetary policy, financial market expectations are more important," he told reporters in Mumbai.
The central bank did not tinker with the short-term rates in its slack season credit policy for 2006-07 as a step towards sustaining the current growth momentum.
It had hiked short-term lending rates in the quarterly reveiw of the monetary policy for 2005-06 in Januray by 0.25 per cent, in turn trigerring hike in retail loan rates.
"Monetary policy deals with financial market much more now than it did 15 years ago," Reddy said.
He claimed the outcome of the monetary policy stances had been "particualrly impressive," which is vivid in terms of current robustness of the manufacturing and services sectors and the health of financial stability.
There was a considerable development in state's fiscal deficits, he added.
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