RBI to support growth as inflation eases, according to MPC minutes.
MUMBAI:
With economic growth in India having lost some momentum due to the third wave of COVID-19 and with inflation trending downward, the country’s monetary policy committee opted to keep rates and stance unchanged. its policy, the minutes of the February 10 meeting showed.
“Inflationary pressures in India continue to stem primarily from secondary factors and recent print also reflects adverse fundamentals,” Reserve Bank of India (RBI) Governor Shaktikanta Das wrote. in the minutes released on Thursday.
“The adjustment to the expected trajectory of inflation in the next fiscal year provides an opportunity for monetary policy to maintain accommodative capacity. At the same time, the economic recovery from the pandemic is still incomplete and not fully developed. Evenness and continued support from different policies remain key to a sustainable recovery.”
India’s consumer prices rose 6.01% in January from the same month last year, compared with a revised 5.66% year-on-year increase in December, driven by food, fuel costs. and household appliances increased.
But the RBI’s monetary policy committee (MPC) left its benchmark repo rate unchanged at 4.0%, sticking to its accommodative policy stance at its most recent meeting.
RBI Deputy Governor Michael Patra said messages from high-frequency indicators came in mixed, warranting policy support, while inflation was approaching an inflection point and it is forecast to soften for until the end of 2022/23.
However, the sole dissident in the MPC, outside member Jayant Varma said that because monetary policy is sluggish, it is important to base policy on the expected state of affairs. of the economy three to four quarters ahead, not about where it was at the time. of meeting.
Varma said that while data and forecasts suggest that real rates need to stay low, they need to turn mildly positive in 2022/23 and will require a slight increase in nominal rates.
Varma like others voted in favor of keeping the repo rate at 4%, but voted against keeping a consistent stance on the two counts.
“First, the move to neutrality is now long overdue. Second, continuing to combat the ill effects of the pandemic has been counterproductive and deflected the MPC’s focus from the core issue. is addressing recessionary trends that are returning at least through 2019,” he wrote.
