Mumbai, June 19: All six members of the RBI’s Monetary Policy Committee favoured a wait-and-watch approach as they voted for a status quo on benchmark interest rates earlier this month, citing high uncertainty over the trajectory of inflation and growth prospects due to the West Asia conflict, according to the minutes of the MPC meeting released on Friday.
The MPC meeting was held during June 3-5.
Governor Sanjay Malhotra, who chairs the committee, as well as the five other members voted to keep the benchmark interest rates unchanged at 5.25 per cent.
During the meeting, Malhotra opined there was high uncertainty in the assumptions made for projections of both inflation and growth on account of reasons such as the duration of the West Asia conflict and the disruption in supply chains, the intensity and geographical spread of monsoon rains and their impact on energy, food and other commodity prices.
“I would prefer to adopt a wait-and-watch approach,” he said.
The minutes showed RBI Deputy Governor Poonam Gupta too felt the need to wait a bit more for global as well as weather-related uncertainties to play out over the coming months, before taking a call on whether and when to reverse the policy cycle.
“This is for two reasons. First, at the current juncture, with growth projected to decelerate and inflation yet to become entrenched, I do not see a case for policy tightening to rein in inflation or inflationary expectations. If anything, it could make the economic pain of the ongoing supply shock sharper,” she said.
Secondly, Gupta said that once the West Asia conflict is resolved, the outlook, both for India as well as globally, could improve rapidly warranting a fresh look at the inflation-growth dynamics.
“Therefore, it would be prudent to adopt a wait and watch approach rather than make an early or preemptive policy pivot,” she added.
In April too, the MPC had kept the key policy rate unchanged.
At the June meeting, RBI Executive Director Indranil Bhattacharyya said inflation projections are subject to several uncertainties in the present context. While WPI inflation has spiked, one needs to wait for its pass-through to CPI inflation, he said, and added the spatial and temporal distribution of monsoon, which is critical for crop outlook, is not yet known. (PTI)
