RBI MPC Minutes: RBI Governor Shaktikanta Das said that the effect of monetary policy is visible and inflation is also gradually decreasing.
Most of the members of the Monetary Policy Committee of the Reserve Bank of India (RBI) were not in favor of any relaxation in the effort to bring retail inflation to the set target of 4 percent. He did not find it appropriate to relax the measures to bring retail inflation to the set target of 4 percent. The details of the discussion held during the Monetary Policy Committee meeting on Friday were made public.
According to this, in the monetary policy review in April, most of the MPC members gave their opinion in favor of maintaining the status quo on policy rates. Only external member Jayant Verma gave his opinion in favor of reducing the policy rate by 25 basis points.
Regarding this, RBI Governor Shaktikanta Das said, ‘I believe that the current monetary policy framework is working well as per its objectives. The effect of monetary policy is visible and inflation is also gradually decreasing. But we should proceed with caution without losing focus from the goal. Taking advantage of the softening of inflation during the last two years, we should work towards the goal of keeping the core inflation rate limited to 4 percent. Das said that the strong growth rate will help in focusing on price stability at the policy level. Is available.
MPC external member Shashank Bhide said that in view of the strong economic growth rate, it becomes necessary to keep inflation around the set target. RBI Deputy Governor Michael Patra said that for the time being the core inflation rate will remain above the target level.
He said that it will remain at the same level until a favorable base effect situation arises in the second quarter of the year 2024-25.
Patra said, ‘At present the situation is not such that we should consider any scope for any relaxation in the monetary policy. Measures to reduce inflation will have to be continued until the risks are completely reduced and near-term uncertainties are removed.
The six-member Monetary Policy Committee kept policy rates unchanged for the seventh consecutive time in April. There was also no change in the stance on withdrawal of financial incentives.
Verma said a real interest rate of 1 to 1.5 percent would be enough to bring inflation down to the 4 percent target. He said the current real policy rate of 2 per cent (based on inflation projections for 2024-25) may be overstated.
Verma said, ‘The economic growth rate in the financial year 2024-25 is estimated to be more than half a percent lower than that of 2023-24. This reminds us that high interest rates harm economic growth in some way or the other.
Ashima Goyal, another external member of the MPC, said the real interest rate is now higher than the natural or neutral interest rate (NIR). He said that this is in line with the inflation target and conducive to maintaining adequate levels of production.
He said that this is not a matter of much concern given the huge profits of the companies and the continued pace of loan allocation.
Goyal said that in view of all the uncertainties, maintaining status quo should be the priority. Rajeev Ranjan, internal member of the committee, said that there is no scope for any relaxation in inflation control at present and everyone needs to be alert.