Monetary Policy Committee decisions: Full view of what happened at RBI's August policy meeting
inflation as it believes that soaring vegetable prices, likely transient, could ease soon after monsoon rains subside. It raised the inflation forecast for the financial year to 5.4 percent, from 5.1 percent earlier, as vegetable prices could keep the headline numbers high even though core inflation may be reasonable.
A forecast of 5.2 percent in the next fiscal first quarter pushes behind the possibility of an early interest rate cut. It introduced a short-term incremental cash reserve requirement (CRR) on deposits to suck out liquidity.
«Going by the past trends, vegetable prices may see a significant correction after a few months. The prospects of kharif crops have brightened, thanks to improvement in the progress of the monsoon,” Governor Shaktikanta Das said.
“While the vegetable price shock may reverse quickly, possible El Niño weather conditions along with global food prices need to be watched closely against the backdrop of a skewed south-west monsoon so far.» The six-member monetary policy committee voted unanimously to keep the key repo rate, the rate at which it lends to banks, unchanged at 6.5 percent and one member dissented on the monetary stance of focusing on withdrawal of accommodation. An ET poll of 15 respondents showed that the repo rate will be unchanged and the MPC will maintain the stance of withdrawal of accommodation.
The trend is expected to continue in July, with several economists predicting CPI inflation at 6.0-6.5% as against 4.81% in June.Soaring Farm Prices India’s MPC, after a reasonably comfortable few months, suddenly faces challenges from soaring farm prices due to supply constraints and delayed monsoon that pushed back planting timelines. Prices of vegetables such as tomatoes have
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