Minute The MPC meeting released on Friday shows that there was extensive discussion on the monetary policy stance. Stating that consumption and investment are still low, Das said, “There is also a risk that the ongoing recovery, which is already strained by the current crisis, could weaken if financial conditions tighten rapidly. In these circumstances, policy making has to be nuanced and nimble”.
However, members were prepared to act in view of the rise in inflation. “The outlook for domestic inflation presented at the February 2022 MPC meeting has undergone a significant change with the conflict and subsequent turmoil in the global commodity markets since the start of the war on February 24, 2022,” Das said. The rise in crude oil prices and its direct and indirect impacts on the CPI have contributed to the nearly 60% upward revision in estimates, with the other major contributors being spillovers from global food price shocks, he added.
While Das was cautious in talking about the policy response to higher rates, other members indicated future course of action. “If, as projections show, inflation remains in the higher reaches, the withdrawal of liquidity already achieved and planned for the coming year will reduce the risk of excess liquidity under inflationary pressures. and pose a threat to financial stability. It will also facilitate transmission of policy impulses across market segments and interest rate structure,” it said. Michael PetraDeputy Governor, RBI said.
External member Jayant Verma, who has been demanding normalization of the policy corridor for months, said that there should be no stance in the policy. “In today’s extremely uncertain situation, it is very important for the MPC not to issue any further guidance that binds its hands. It is necessary to clearly communicate that in future meetings, the MPC will consider itself completely independent to take any action on the Policy Rates that may be warranted by the data that becomes available. Verma said he was not participating in the policy action discussion as the earlier guidance had barred any such action.
Mridul K Sagar, Deputy Governor, RBI said global inflation is here to stay and is ruling multi-year highs in many emerging markets. In India too, inflation which has crossed the upper tolerance level is expected to remain high in the first quarter of the current fiscal. “Inflation expectations need to be closely monitored. If expectations are rising, especially if they stabilize and start rising faster than real inflation, Monetary policy To stop a self-sustaining inflation spiral, expectations have to be reignited,” said Sagar.
Among outside members, Shashank Bhide voted to remain liberal with a focus on the return of housing to ensure that inflation remains within the target while supporting growth going forward.
another external member Ashima Goyal It seems that RBI was already behind in raising rates. “Research as well as Indian experience in the 2000s shows that early and gradual growth works better. Liquidity rebalancing began early. In terms of moving towards equilibrium or neutral real rates, consistent with non-inflationary growth The time has come to roll back the adjustment of the crisis. As long as rates remain below this, even then this strict regime is not in place,” she said.