October MPC minutes: RBI Governor says cannot risk another bout of inflation
RBI Governor Das reiterated his stance that rate cuts could be premature and said at this stage of the economic cycle, the best approach now would be to remain flexible and wait for more evidence of inflation aligning durably with the target.
- Oct 23, 2024,
- Updated Oct 23, 2024 8:19 PM IST
Reserve Bank of India Governor Shaktikanta Das, in the October Monetary Policy Committee (MPC) minutes, said India cannot risk another bout of inflation and rate-setting panel must adopt a cautious approach to lowering interest rates. In its October MPC meeting, the central bank kept the key interest rate unchanged. However, it modified its policy stance to "neutral", which could potentially lead to rate cuts due to early indications of a slowdown in economic growth.
Governor Shaktikanta Das noted: "High-frequency indicators suggest that economic activity remained steady during the second quarter of FY25," driven by improved government expenditure and corporate investment.
He added that private sector investments are "gaining steam," reflecting a positive outlook for India’s growth trajectory.
In the MPC meeting minutes, Das noted that the momentum in food prices continued into the first week of October, which could "keep even October headline inflation high." Despite this, he assured that beyond the short term, "the outlook for food inflation is becoming more favourable" with better prospects from the kharif and rabi seasons.
On the broader inflation front, Das noted that "core inflation, in the absence of a major cost-push shock, is likely to remain contained," pointing to stability in the Indian economy.
He added: "Despite the near-term uptick in inflation, the outlook for headline inflation towards the later part of the year and early next year points to further alignment with the 4% target."
RBI Governor Das reiterated his stance that rate cuts could be premature.
"At this stage of the economic cycle, having come so far, we cannot risk another bout of inflation. The best approach now would be to remain flexible and wait for more evidence of inflation aligning durably with the target," he wrote.
Other members too wrote about their observations.
"The arduous battle against inflation is far from won, but we are more confident of eventual success in bringing CPI inflation durably closer to the target," external member Saugata Bhattacharya said in the minutes published on Wednesday.
Michael Patra, RBI deputy governor, wrote that while the persistence of inflationary pressures could dissipate with a less restrictive stance of monetary policy, "reducing restraint too quickly may negate the progress made on disinflation".
Patra expressed confidence in growth revival, attributing the recent slowdown in economic indicators to idiosyncratic factors like unusually heavy rainfall during the retreat of the southwest monsoon and pitrupaksha.
“These should stabilise in the second half of the year as consumption receives a boost during the festival season, rural demand strengthens further, and investment is buoyed by government capital expenditure gaining steam,” he said.
Reserve Bank of India Governor Shaktikanta Das, in the October Monetary Policy Committee (MPC) minutes, said India cannot risk another bout of inflation and rate-setting panel must adopt a cautious approach to lowering interest rates. In its October MPC meeting, the central bank kept the key interest rate unchanged. However, it modified its policy stance to "neutral", which could potentially lead to rate cuts due to early indications of a slowdown in economic growth.
Governor Shaktikanta Das noted: "High-frequency indicators suggest that economic activity remained steady during the second quarter of FY25," driven by improved government expenditure and corporate investment.
He added that private sector investments are "gaining steam," reflecting a positive outlook for India’s growth trajectory.
In the MPC meeting minutes, Das noted that the momentum in food prices continued into the first week of October, which could "keep even October headline inflation high." Despite this, he assured that beyond the short term, "the outlook for food inflation is becoming more favourable" with better prospects from the kharif and rabi seasons.
On the broader inflation front, Das noted that "core inflation, in the absence of a major cost-push shock, is likely to remain contained," pointing to stability in the Indian economy.
He added: "Despite the near-term uptick in inflation, the outlook for headline inflation towards the later part of the year and early next year points to further alignment with the 4% target."
RBI Governor Das reiterated his stance that rate cuts could be premature.
"At this stage of the economic cycle, having come so far, we cannot risk another bout of inflation. The best approach now would be to remain flexible and wait for more evidence of inflation aligning durably with the target," he wrote.
Other members too wrote about their observations.
"The arduous battle against inflation is far from won, but we are more confident of eventual success in bringing CPI inflation durably closer to the target," external member Saugata Bhattacharya said in the minutes published on Wednesday.
Michael Patra, RBI deputy governor, wrote that while the persistence of inflationary pressures could dissipate with a less restrictive stance of monetary policy, "reducing restraint too quickly may negate the progress made on disinflation".
Patra expressed confidence in growth revival, attributing the recent slowdown in economic indicators to idiosyncratic factors like unusually heavy rainfall during the retreat of the southwest monsoon and pitrupaksha.
“These should stabilise in the second half of the year as consumption receives a boost during the festival season, rural demand strengthens further, and investment is buoyed by government capital expenditure gaining steam,” he said.