RBI’s latest monetary policy action, to maintain remain so On benchmark interest rates, the policy stance, as well as full-year GDP growth and inflation projections, largely stemmed from warnings of the risks posed by the O’Micron version of the novel coronavirus. Announcing the bi-monthly policy, Governor Shaktikanta Das observed that ‘barriers from global growth’ were the main risk to the domestic outlook, which was now “slightly tarnished by the Omicron version of COVID-19”. With the key drivers of demand in the economy – private investment and private consumption – still lacking meaningful momentum, the Monetary Policy Committee opted to continue with its growth supportive ‘accommodative’ policy stance to ensure a sustainable and broad-based recovery. be enabled. They said. While questioning the MPC’s stance may seem odd, given that the ongoing recovery from the record contraction of the last fiscal is yet to be recorded. Across the board expansion from pre-pandemic levelsThe fact that one in six members of the rate-setting panel has disagreed on the policy stance for the third time in a row cannot be ignored. Recognizing in October that ‘the upside risks to long-term inflation and inflation expectations were high’, external member Jayant Verma cautioned the committee against falling into “a pattern of slow policy-making” at the time. Excessive desire to avoid surprises. And while his specific reasons for voting against Grain this week aren’t immediately available, the MPC is prioritizing growth over price stability for now, it’s clear.
Governor Das, who acknowledged the seriousness of containing inflation when he asserted that “price stability remains a core tenet for monetary policy as it promotes growth and stability”, however, did not affect retail prices. Appears to be optimistic about the outlook. Arguing that the arrival of winter would help bring down vegetable prices, which had intensified in October, contributing to a marginal pick-up in headline CPI inflation that month, Mr Das relied on optimism, saying Said that the ‘slowdown in the economy’ could limit the pass-through of cost-push pressures, which have kept core retail inflation consistently high for 17 months. The RBI’s November round ‘Inflation Expectations Survey of Households’ shows that households expect inflation to pick up in the near and medium term. An extension survey earlier this month projects respondents’ average inflation expectations, taking into account both the potential Omicron effect in the wake of excise duty cuts and softening fuel prices, at a three-month forward rate of 10.8. % and 10.9% on reading one year ahead. And though the RBI has gradually begun to tighten the liquidity it opened up in the wake of the pandemic last year, a more robust response to address price pressures will become imperative sooner rather than later. What Mr Das said was the RBI’s motto at the moment, to ensure “a soft landing that is well timed” to risk delays.
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