After the Monetary Policy Committee meeting earlier this month, the RBI decided to keep its key lending rates at a record low for the 10th time in a row.
After the Monetary Policy Committee meeting earlier this month, the RBI decided to keep its key lending rates at a record low for the 10th time in a row.
Reserve Bank Governor Shaktikanta Das said at a recent meeting of the Monetary Policy Committee that amidst prolonged uncertainty, continued policy support from the coronavirus pandemic will be crucial for sustained economic recovery.
According to the minutes of the MPC meeting released by the Reserve Bank, Mr Das said, “In this period of protracted uncertainty, it would be wise to remain agile and respond to emerging challenges in a gradual, calibrated and well-telegraphed manner.” on Thursday.
Noting that the economic recovery from the pandemic is incomplete and uneven, he said, “Continuous support of various policies is critical for sustained recovery.” The governor said the renewed jump in international crude oil prices, however, required close monitoring.
“We need to be alert to the risks of domestic inflation arising from the rise in international commodity prices due to exogenous factors including geopolitical developments. While core inflation remains high, demand-pull pressure is still muted given the slowdown in the economy,” he said at the MPC meeting.
After a three-day meeting of the Monetary Policy Committee (MPC) earlier this month, the RBI decided to keep its key lending rates at a record low for the 10th time in a row to support the economy’s sustainable recovery from the pandemic.
The six-member MPC, which has been on hold since August 2020, voted unanimously to maintain status quo on the repo rate and by a 5-1 majority decided to maintain the accommodative policy stance for as long as necessary.
MPC member and RBI Deputy Governor Michael Debabrata Patra said that the Indian economy is facing adversity as well as cross-current.
Referring to the adverse conditions, he said that more than one billion vaccinations have been achieved but only 56 per cent of the total population has been fully vaccinated. He added that the next Arab “will be back breaking”.
He said that economic activity in India appears to have weathered the third wave strongly, but the messages of the high frequency indicators to come are mixed.
“It is prudent to assume that the recovery has lost some momentum during Q4: 2021-22 and Q1: 2022-23. Inflation is approaching an inflection point, after which it is projected downwards during 2022-23,” Mr Patra said while voting to keep the policy rate unchanged and the policy accommodative stance unchanged. .
RBI executive director and MPC member Mridul K. Sagar said the Omicron version as well as continued port congestion and supply constraints have started dragging down global growth.
This, in turn, can act according to Bernoulli’s principle on fluid pressure, causing the growth pipe to narrow, leading to a drop in external demand, which serves to reduce the price pressure, which is on the supply side. higher than that, he said.
On inflation, Mr. Sagar said headline inflation is projected to moderate around 5% in the first half of 2022-23 and then further reduce to the target of 4% by the third quarter of the next fiscal.
However, the outcome of the monsoon and the dynamics of oil prices will need to be closely monitored, he said.
MPC member Jayant R Verma voted in favor of keeping the policy rate at 4%, but voted against the policy stance in two cases.
“First, the switch to a neutral stance is now long overdue. Second, continuing to voice the ill-effects of the pandemic has become counter productive and diverts the MPC’s focus from the core issue of addressing bearish trends. Those go back at least to 2019,” Mr Verma said.
MPC member Ashima Goyal was of the view that the current account deficit remains manageable and the overall balance of payments surplus with an increasing share of foreign direct investment.
This is the time to align the policy to the needs of the domestic cycle, said Ms. Goyal.
“Given the expected trends in inflation and growth, and to ease market reaction, I vote to continue with the current stance and repo rate,” Ms. Goyal said.
MPC member Shashank Bhide said the need for favorable monetary and financial conditions remains a dire situation to reinforce the positive growth trend in the economy. Increasing the pace of consumption and investment expenditure will require access to financial resources for both consumers and firms.
They voted in favor of continuing the accommodative stance as long as necessary to revive and sustain growth on a sustainable basis and mitigate the impact of the pandemic on the economy, while ensuring that inflation remains within the target going forward. Stay tuned.
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