Business

Monetary Policy Committee Needs To Be Watchful On Inflation: Minutes

   Download Android App    Share in      FullScreen   CheckVideos

The monetary policy committee must be watchful of inflation expectations getting entrenched if prices remain elevated for too long, as it could undermine its hard-earned credibility in efficient inflation targeting, MPC member Jayant Varma wrote in the June meeting minutes published on Friday."To maintain and enhance this credibility, the MPC needs to remain data driven so that it can respond rapidly and adequately to any unforeseen shocks that may arise in future," he said.Earlier in the month, the Reserve Bank of India (RBI) kept interest rates at record lows and promised to keep its policy accommodative for as long as necessary and said current inflation pressures would likely be transient.Data released after the policy review showed India's annual retail inflation rate rose 6.30 per cent year-on-year in May, breaching the RBI's upper tolerance band of 6% and up from 4.29% in April and sharply above analysts' estimate of 5.30 per cent.The wholesale price inflation rate rose 12.94 per cent, its highest in at least two decades.The data has raised concerns over how long the RBI can retain its policy accommodation and though bets on policy normalisation had been pushed back after the second wave of the pandemic hit the country, rising inflation risks have again brought forward those expectations."Clear signs of generalisation in CPI inflation setting in could be a tipping point where growth-inflation dynamics could alter," RBI executive director and MPC member Mridul Saggar wrote."Also, with a further rise in elevated inflation expectations, policy may need to respond if these expectations are becoming unhinged," he added.However, most members believe that retail inflation is not yet predominantly demand-driven and thus it was not worth sacrificing growth to lower price pressures as yet.Mr Varma said there is a fear that the health shock is inducing high levels of precautionary savings that could depress demand for several quarters to come, and thus at this point the need is for monetary accommodation to support economic recovery.Gross domestic product grew 1.6 per cent in January-March compared with the same period a year earlier while for the year as a whole, the economy contracted 7.3 per cent, data late last month showed."Focus on revival and sustenance of growth is the most desirable policy option while of course remaining watchful of the inflation trajectory," governor Shaktikanta Das wrote.




Unlimited Portal Access + Monthly Magazine - 12 issues-Publication from Jan 2021

Buy Our Merchandise (Peace Series)

 

Contribute US to Start Broadcasting


It's Voluntary! Take care of your Family, Friends and People around You First and later think about us. Its Fine if you dont wish to contribute and if you wish to contribute then think about the Homeless first and Feed them. We can survive with your wishes too :-). You can Buy our Merchandise too which are of the finest quality.

Debit/Credit/UPI

UPI/Debit/Credit

Paytm

STRIPE

Details
Category: Business


20