RBI Monetary Policy Committee meet minutes reveal determination to reach 4% inflation target

RBI MPC Meeting October 2023: The minutes of the RBI Monetary Policy Committee (MPC) meeting reveal that inflation remains a top concern for the MPC members.

Most of the members of the MPC reiterated that a close watch needs to be kept on inflation while voting to remain focussed on the withdrawal of accommodation. Prof. Jayanth Varma meanwhile, expressed some reservations on the withdrawal of accommodation stance.

The MPC meeting was held between the 4th - 6th of October during which it was unanimously decided by all the members, to keep the repo rate unchanged and 6.5%.

Minutes of RBI MPC Meet 2023

While expecting demand to sustain the growth momentum, Dr. Shashanka Bhide pointed out to the downside risks emerging from the uncertain global market. Dr Bhide also notes the fact that the transmission of the policy rate actions so far are still incomplete.

Dr Ashima Goyal points out, "Despite the large inflation spikes to vegetable and crude oil prices, there is favourable news on inflation". However, explaining her vote for the stance on withdrawal of accommodation, Dr Goyal says, its a signal towards the MPC's determination to reach its 4% target. While this stance rules out a rate cut, it allows a rise, "but that will not be required unless there are second round effects from the repeated supply shocks". "The guidance therefore is that future moves will be data dependent".

Prof Jayanth Varma differs with other MPC members on the matter of the stance, as he did in the previous meeting as well. Expressing his reservations he says, "Successive meetings that promise to withdraw accommodation while actually keeping rates unchanged do not enhance the credibility of the MPC. I would much prefer a stance in which words are consistent with the actions". He adds that right now the market needs to know how long the rate would be maintained at a high level.

Dr Rajiv Ranjan also echoes the majority view that a disinflationary approach is required which allows for a readiness to act if needed. "This calls for continuation of withdrawal of accommodation stance for monetary policy so as to facilitate further transmission of the cumulative policy repo rate hike of 250 basis points on the economy", he adds.

RBI Governor Shaktikanta Das reiterates the fundamental goal to align inflation with the 4% inflation target, while pointing out the Monetary Policy has to be ready to act, if needed and that macroeconomic stability has to be preserved. The governor lists out various possible risks to inflation with the example of the inflationary pressures that followed the spike in vegetable prices in July-August. This "has once again shown that headline inflation remains vulnerable to recurring and overlapping food price shocks", he adds.