"If I seem unduly clear to you, you probably misunderstood what I said." Alan Greenspan's famous quip about central bank communication might be getting a fresh outing in India.
The Reserve Bank of India has found itself under fire at least twice in recent weeks over its messaging.
The first episode involved a dollar deposit scheme introduced in June to attract foreign currency inflows and support a rupee that had slipped to record lows. The RBI shut the scheme a month early, just a week after Governor Sanjay Malhotra was asked about a potential early closure and said no such proposal was on the table "as of now".
Because the RBI never specified how much money it hoped to attract or how it viewed the costs attached to it, markets assumed the scheme would run its full course. The surprise closure, probably a result of stronger-than-expected inflows, nevertheless rattled currency and bond markets.
While the RBI could not have stated an explicit target, "it would have helped if the RBI were more explicit about costs and attendant liquidity and repayment implications to balance expectations," said Dhiraj Nim, economist and FX strategist at ANZ Research.
Days later, investors were wrong-footed again when minutes from the RBI's August rate-setting meeting struck a notably less dovish tone than the policy itself.
The meeting had been read to suggest the panel was in no hurry to raise rates. Policymakers said inflation pressures were largely supply-driven and showed "little" sign of broadening, prompting analysts to rein in rate-hike expectations.
Yet the minutes suggested policymakers were already contemplating tighter policy. The rise in average headline and core inflation "may suggest a recalibration of policy rate," Malhotra said in the minutes, in a far clearer signal of tighter monetary policy than was offered at the time of the rate decision.
"There is a clear disconnect," State Bank of India chief economist Soumya Kanti Ghosh wrote, pointing to both the deposit-window surprise and also differences between the policy statement, the press conference following the decision and meeting minutes.
The RBI did not reply to Reuters' emailed request for comment.
