NEW DELHI: A majority of members of the monetary policy committee (MPC) of the Reserve Bank of India remained focused on risk of inflation in future and favoured status quo on rate cut.
In the Minutes of the meeting released by the RBI, most members took solace in the fact that GDP growth has been better than expected and considered inflation as a bigger risk in the short term.
Five out of six members of the MPC voted to keep policy rates unchanged due to uncertainty in inflation over food prices, as per the Minutes of MPC. Only Prof Jayanth R Varma voted to decrease interest rate by 25 basis points as he thinks that the process of fiscal consolidation is expected to continue in FY25, which opens up space for monetary easing without risking an inflationary spiral.
“In my view, the time has come for the MPC to send a clear signal that it takes its dual mandate of inflation and growth seriously, and that it would not maintain a real interest rate that is significantly more than what is needed to achieve its target,” Varma said.
Dr. Shashanka Bhide, Dr. Ashima Goyal, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shaktikanta Das voted to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth. Prof. Jayanth R. Varma voted for a change in stance to neutral.
RBI Governor Shaktikanta Das cautioned against the fluctuation in inflation. He said the work is not yet over. “At this juncture, monetary policy must remain vigilant and not assume that our job on the inflation front is over. We must remain committed to successfully navigating the ‘last mile’ of disinflation which can be sticky. As markets are front-running central banks in anticipation of policy pivots, any premature move may undermine the success achieved so far,” Das added.