RBI Monetary Policy Committee meet minutes reveal continued focus on bringing inflation down

The minutes of the RBI Monetary Policy Committee (MPC) meet have been released. The minutes show that majority of the MPC members continue to remain focussed on ensuring that inflation reaches the RBI target of 4%.

During the recent monetary policy committee meet held from February 6th - 8th, it was decided to keep the repo rate unchanged at 6.5% for the 6th time in a row. It also decided to remain focused on the withdrawal of accomodation stance.

Five of the six committee member voted to keep the repo rate unchanged, while there was one vote to cut the repo rate by 25 basis points.

Dr Shashanka Bhide voting for a status quo on the rates said that transmission of previous increases in rates are still not complete and it must be ensured that the inflation target is achieved in a sustained way.

Dr Ashima Goyal also voting for repo rate to remain at 6.5% said that since growth continues to be strong and headline inflation is still near the upper end of the tolerance band, we can wait slightly longer to ensure the inflation continues to move lower.

Prof Jayant Varma, who voted for a cut of 25 basis points and for a change of stance to neutral said that the time had come for the MPC to send a clear signal that it takes its dual mandate of inflation and growth seriously. He points out "Inflation is projected to average 4.5% in 2024-25, and, therefore, the current policy rate of 6.5% translates into a real rate of 2%. I do not believe that such a high real rate is required at this stage to drive inflation down to the target of 4%.".

Dr Rajiv Ranjan, also voting for a status quo in the repo rate said that successfully managing the final descent of inflation is the most challenging part.
Adding that avoiding any pre-mature move will help guard against the biggest challenge to credibility, i.e., having to backpedal later if faced with upside surprises to inflation.

Dr. Michael Debabrata Patra while voting for a status quo on rates, says that It is only when inflation subsides and stays close to the target lastingly that policy restraint can be eased.

Governor Shaktikanta Das says that since growth is holding firm and inflation trending down "monetary policy must remain vigilant and not assume that our job on the inflation front is over".