Inflation fight still on, tactical pause to gauge impact of tightening so far: Das at MPC meeting

Clipped from:

Our Bureau

RBI Governor Shaktikanta Das –

All six members of the rate-setting Monetary Policy Committee (MPC) were on the same page on the need to evaluate the cumulative impact of the tightening done so far, and hence, in one voice voted for a pause at their last meeting, even as they left the door open forfuture rate hikes.

The policy repo rate was left unchanged at 6.5 per cent at the April 3-6 MPC meeting.

Among the six members, only Jayanth R Varma, Professor, Indian Institute of Management, Ahmedabad, expressed reservation on the resolution to “remain focussed on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth,” per the Minutes of the MPCMeeting.

inflation still sticky

RBI Governor Shaktikanta Das observed that inflation is projected to soften in 2023-24, but the disinflation towards the target is likely to be slow and protracted.

The projected inflation in Q4:2023-24 at 5.2 per cent 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. I am, therefore, of the view that we do a tactical pause in this meeting of the MPC. This is a tactical pause and not a pivot or a change in policy direction,” Das said.

Michael Patra, Deputy Governor, said it is prudent to anticipate future shocks to the inflation trajectory while evaluating the cumulative tightening of monetary policy so far. Jayanth Varma said the balance of risks has shifted slightly towards inflation since the February meeting, but the best estimate currently is that the 315 bps of effective tightening of the overnight interest rate (from a reverse repo rate of 3.35 per cent to a repo rate of 6.50 per cent) would be quite sufficient to bring inflation under control. Therefore, hevotedin for a pause.

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