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Rbi: RBI’s MPC meet dashes hopes of policy pivot



MUMBAI: The minutes of the central bank’s monetary policy committee (MPC) meeting held on February 8 rule out any policy pivot by the RBI and raise the possibility of another rate hike.
The minutes reveal that the RBI governor Shaktikanta Das called for an “unwavering commitment” to bring down inflation to ensure a decisive and durable moderation towards the target of 8%. RBI deputy governor Michael Patra was even more hawkish, stating that inflation remains the biggest threat to the macroeconomic outlook.
The MPC’s minutes have been released at a time when there is an expectation that the US Federal Reserve will hike rates further. “Moving the policy rate into the restrictive territory at a resolute pace has provided the headroom to continue to moderate the order of rate increases,” said Patra. “While keeping in mind the growth objective, the foot must remain on the brake as we chart our future trajectory. On a pragmatic basis, it is important to at least contain inflation within the tolerance band in 2023-24 as the first milestone to be passed in aligning inflation with the target,” said Patra as he voted for a hike.
Although the two external members, Ashima Goyal and Jayanth Varma, had dissented against the rate hike, the other members appear to have hardened their stance.
Rahul Bajoria, an economist with Barclays, said, “The RBI’s latest minutes highlight clear and rising divergence among MPC members, but only two remain dovish, while the overall balance tilted towards more hawkishness. After the higher-than-expected January inflation, we think the balance of risks suggests another hike in April, barring any fiscal action to cool prices.” He added that the balance might tilt in favour of a pause if the government takes measures to pass through lower crude oil prices to consumers, thereby cooling prices.
Das said, “It would be inadvisable to provide specific guidance when we are in a tightening cycle and experiencing such extreme uncertainty. The only forward guidance that we can provide is that we will remain vigilant, monitor every incoming information and data, and shall act appropriately to maintain price stability in the interest of strengthening medium-term growth.”


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