MPC keen to keep lid on inflation, show minutes
inflation to the 4% target on a durable basis,” Reserve Bank of India (RBI) Governor Shaktikanta Das said in the minutes of the rate-setting panel’s last review meeting.
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In the last monetary policy committee (MPC) review on rates earlier this month, the panel decided to keep the policy rates unchanged, stretching the status quo on the cost of funds to at least 16 months.
External panel member Jayanth Varma voted for a change in the panel’s stance to “neutral” from “withdrawal of accommodation”, while all the members voted for a pause in the policy rates at 6.5%. Barring Varma, the other MPC members backed the move to continue with the current stance.
Headline consumer inflation has been steadily falling since July 2023, after touching a peak of 7.6%. It is now closer to the legally mandated target of 4%, with a 4.8% print in March.
Still, members of the rate-setting panel need to be convinced that the slide would continue and that inflation is brought down, durably, within the limits set by the law.
“The MPC minutes showed that members who have been hawkish earlier likely dialled up their hawkishness a notch, advocating patience on inflation and uncertainties amid robust growth,” said Shreya Sodhani, regional economist, Barclays. “With the MPC seeing no urgency to cut rates, we doubt the RBI will front-run the US Federal Reserve in pivoting. We, therefore, now expect rate cuts from Q4 in 2024.”
HIGHER REAL RATES
Although real interest rates are
