Global uncertainty makes fight against inflation tough: RBI
Mumbai, February 22
Majority of members of the high-powered Monetary Policy Committee (MPC) of the Reserve Bank were concerned about heightened inflation even as two panellists raised objections against an increase in the benchmark interest rate, according to the minutes of the meeting released on Wednesday.
Following the recommendations of the MPC, the RBI increased the rate by 25 basis points on February 8, taking the repo rate to 6.5%. It was the sixth straight hike since May 2022.
“The fight against inflation is complicated by the global outlook. There is some consensus growing around a milder slowdown than earlier feared, although geographical disparities complicate the prognosis. Be that as it may, the outlook for global inflation is turning more uncertain than before,” Patra opined as per minutes of the Monetary Policy Committee (MPC).
Reserve Bank Governor Shaktikanta Das, who heads the six-member MPC, also said overall, there is considerable uncertainty at this stage on the evolving inflation trajectory due to ongoing geopolitical tensions, global financial market volatility, rising non-oil commodity prices, volatile crude oil prices and also weather-related events.
He also said a 25 basis points rate increase provides space to calibrate future monetary policy actions and stances based on evolving macroeconomic conditions.
The six-member MPC comprises three RBI officials — Governor Shaktikanta Das, Deputy Governor Michael Debabrata Patra, and Executive Director Rajiv Ranjan; and three government-nominated external members — Shashanka Bhide, Ashima Goyal and Jayanth R Varma.
Ranjan, as per the minutes, said it will be premature to pause the interest rate hike when there are no definitive signs of a slowdown in inflation, particularly core inflation.
“Nevertheless, as the policy rate adjusted for inflation has now turned positive, albeit barely so, there is a case for paring down the pace of rate hike to the usual 25 bps,” he said.
