RBI’S MPC remains cautious on inflation, show minutes
MUMBAI: The Reserve Bank of India’s (RBI’S) monetary policy committee (MPC) sounded cautious on inflation and preferred to wait for more data to see for how long price pressure and growth momentum would remain soft, according to minutes of its December 5 meeting published on Wednesday.
The six-member committee unanimously decided to leave rates unchanged at the meeting two weeks ago, while staying optimistic on growth.
While the RBI under the former governor, Urjit Patel, sounded hawkish at the meeting, the panel, under the new chief, Shaktikanta Das, might be more focussed on boosting growth and cutting rates after a recent sharp decline in inflation.
“While the recent downward surprises to inflation have significantly reduced the extent of policy tightening required in future, they have not eliminated the requirement altogether,” said RBI deputy governor Viral Acharya in the minutes.
While noting the recent easing of inflation and growth momentum, the panel members preferred to wait for some more data to determine the interest rate outlook, citing uncertainties over themedium-termoutlookonfood inflation and oil prices. However, under Das, who is in favour of supporting growth, the rhetoric is likely to change given that inflation has eased this month.
India’s November headline inflation fell to its lowest in 17 months, to 2.33%, well below the RBI’S medium-term target of 4%.
Economists expect inflation to stay muted for the next few months as global crude prices are likely to stay soft and India’s food prices might remain low. The RBI revised its inflation projections downwards to 2.7-3.2% by March, from 3.9-4.5% two months back, and expects it to stay within 4.2% by September 2019.
R Dholakia, known for his dovish attitude, called for a change in stance to “neutral” from “calibrated tightening” as the downside risks to inflation “cannot be overlooked”. “We should not deny any possibility of either a rate cut or a rate hike in the near future depending on data coming in,” Dholakia said.