MUMBAI: The possibility of more rate hikes is still alive as the members of the Reserve Bank of India’s Monetary Policy Committee (MPC) said the fight against inflation is still not over, showed the latest minutes of the MPC meeting.
The impact of monsoon and crude oil prices on inflation weighed on the decision of MPC members to leave repo rate unchanged during the last meeting. All MPC members voted for a pause in rate increase in April 2023 monetary policy.
“Our fight against inflation is far from over and we have to continue with our efforts to bring down inflation closer to the target over the medium term,” said RBI Governor Shaktikanta Das said during the last MPC meeting held during April 3-6.
According to the RBI governor, inflation for 2023-24 is projected to soften, but the disinflation towards the target is likely to be slow and protracted. “The projected inflation in Q4:2023-24 at 5.2% would still be well above the target. Therefore, at this juncture, we have to persevere with our focus on bringing about a durable moderation in inflation and at the same time give ourselves some time to monitor the impact of our past actions,” he noted.
After raising repo rate by 250 basis points in six back-to-back hikes since May 2022, the central bank decided to leave the repo rate unchanged at 6.5% in its meeting early this month, surprising the market as experts were expecting a 25 basis points hike in the meeting.
It did not change its policy stance and remained focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth. Jayanth Varma, one of the members of the MPC, said it would be premature to declare end to the rate-tightening cycle as thewar against inflation has not yet been won.
“It is clear that the war against inflation has not yet been won, and it would be premature to declare an end to this tightening cycle. There is need for heightened vigilance in the face of the fresh risks that I highlighted earlier in my statement,” Varma said. Members were concerned about impact of monsoon on the prices.
“Because of erratic weather and continuing global uncertainties, and until it is clear that inflation is well on the path to reaching the target, it is necessary to emphasise that this may not be the end of the rate hikes,” MPC member Ashima Goyal said.
