Reserve Bank of India (RBI) Governor Shaktikanta Das has said the ongoing necessity to address inflation, cautioning against premature policy adjustments that could potentially jeopardise the progress made in stabilising prices. During the February Monetary Policy Committee (MPC) meeting, detailed minutes of which were disclosed by the central bank on Thursday, Das underscored the imperative for monetary policy to remain watchful, asserting that the task of curbing inflation is not yet completed.
The governor highlighted the significance of the MPC’s commitment to navigating through the final stages of disinflation, highlighting its persistent nature. These remarks were made in conjunction with Governor Das’s vote in favour of maintaining the current key interest rate earlier this month, as revealed by the meeting’s minutes.
Expressing concerns over market speculation and anticipation of central bank policy adjustments, Das warned against premature actions that could undermine the achieved successes in addressing inflation. He argued that preserving price and financial stability is vital for sustaining prolonged periods of robust economic growth, reiterating the central bank’s objective of attaining a sustainable 4 percent inflation rate while fostering economic expansion.
During the MPC deliberations, five out of six members advocated for retaining the short-term benchmark lending rate at 6.5 per cent. However, an external MPC member, Jayanth R Varma, advocated for a 25 basis points reduction in the repo rate and a shift in stance to neutral, citing projections of continued fiscal consolidation in 2024-25, which could allow for monetary easing without provoking inflationary pressures.
Varma noted the necessity for the MPC to signal its unwavering commitment to its dual mandate of managing inflation and fostering growth, suggesting that the real interest rate maintained by the committee should align closely with its objectives.
RBI Deputy Governor and MPC member Michael Debabrata Patra echoed the sentiment, asserting that monetary policy should remain restrictive to exert downward pressure on inflation while mitigating the adverse effects on economic output associated with disinflation. Patra said that policy restraint could only be relaxed once inflation subsides and remains consistently close to the target level.
In summary, the recent statements from the RBI Governor and MPC members underscore a continued focus on inflation management and caution against premature policy adjustments in the face of evolving economic conditions.
