Informist, Thursday, Apr 20, 2023
MUMBAI – Following are the highlights of the minutes of the Apr 3, 5-6 meeting of the Reserve Bank of India’s Monetary Policy Committee, released by the central bank today:
SHAKTIKANTA DAS
* Global economic environment has changed dramatically since February
* Banking crises, cut in OPEC output has clouded global outlook
* Global inflation is easing but at a tardy pace
* Central banks’ runway turning narrower, bumpy for soft landing
* Domestic, global factors to bring about disinflation
* Optimistic about rabi harvest despite recent unseasonal rains
* Prices of edible oils have moderated
* Input costs lower due to softer global commodity prices
* Softer global commodity prices may soften core inflation
* Domestic growth impulses remained buoyant in Jan-Mar
* Uncertainty in crude oil prices warrants close monitoring
* Drag from net external demand is moderating
* Govt’s push on infrastructure spend to support investment activity
* Cumulative impact of past policy steps still unfolding
* Disinflation towards target likely to be slow, protracted
* Inflation for FY24 projected to soften
* Have to persevere towards durable moderation in inflation
* Our fight against inflation is far from over
* Aim to bring inflation closer to target over medium term
MICHAEL PATRA
* Bank credit growth shows pass-through of past policy moves
* Future path of inflation vulnerable to supply shocks
* India economy momentum broadening, slack being pulled in
* Inflation above 6% inimically harmful for growth
* Inflation remains high, biggest risk to economic outlook
* Process to get CPI back to target to be gradual, uneven
* Stance of policy has to remain disinflationary
* Stance of policy must be resolute to meet 4% CPI target
* Demand pressures remain strong for contact-intensive services
RAJIV RANJAN
* Still important to assess full impact of past rate hikes
* Recent challenges raise questions about policy conduct
* Crosscurrents of uncertainty continue to sweep the globe
* Virtuous guide to policymaking is to tread cautiously
* Aptly poised to pause in backdrop of frontloaded hikes
* Policy finely calibrated to domestic, global scenarios
* Some clear positive signals visible on domestic front
* Domestic growth momentum remains robust
* India insulated from global banking crisis so far
* Inflationary expectations gradually easing
* Considerable noise in Jan-Feb CPI print due to cereals
* CPI above comfort zone now, but there are reasons for optimism
* Heat wave in February, rain in March seen having only local impact
* Core CPI may ease in FY24 on fall in industrial input prices
* Core CPI may ease in a protracted manner in FY24
* See inflation risks from climate factors in FY24
* See inflation risks from crude oil, food items such as milk
* See second-order inflation impact remaining subdued
* FY24 growth outlook improved, investment revival entrenched
* Growth outlook better on lesser hit from external demand
* Govt infrastructure focus to crowd in private investment, support growth
* Policy tightening needs to be calibrated judiciously
* Rate normalisation effects yet to fully transmit to economy
* Real rates expected to rise given projected inflation
* Real rates now positive by most measures
* Neither a ‘premature’ pause nor a ‘permanent’ one
* This is a ‘wait and watch’ pause
* Any durable fall towards 4% CPI target still distant
* Strength, resilience of economy, CPI fall gives confidence
SHASHANKA BHIDE
* Weak global economy marked by decelerating demand
* Weak global economy marked by uncertain financial, energy markets
* Policy tightening in major economies behind weak demand
* Slower growth in China contributed to weak demand
* Ukraine war impacting a range of markets, including energy
* See global financial market uncertainty till inflation moderates
* Drag on India’s goods exports expected to prevail in FY24
* High frequency indicators hint at continued growth momentum
* Business outlook sentiments show a mixed picture
* Adverse weather may hit agriculture, poses risk to growth
* Deceleration in Feb a positive trend for inflation
* On-month fall in momentum a positive trend for inflation
* Significant downside risks to output growth momentum
* Cumulative impact of policy actions yet to be realised
* Geopolitical conflicts may lead to spike in inflation
* Aligning inflation with target remains a policy priority
ASHIMA GOYAL
* Global slowdown less severe than expected
* Signs of slowing in both global growth, inflation
* Global central banks’ tightening adequate
* Lagged effect of global tightening to bring down inflation
* Continued regulatory vigilance essential
* India financial sector outperformed under pluri-shocks
* Policy, buffers allow independence from advanced economies
* Signs of slowdown in some high frequency data in India
* Lagged effects of rate rise are just beginning
* Lagged effects of rate rise to play out in next few months
* India inflation is expected to come down over the year
* CPI cereal price issue to reverse as market prices fall
* Exchange rate is stable or strengthening
* Slowing momentum in consumer goods to bring down inflation
* Real policy rate enough to bring inflation to 4% target
* Higher real policy rate may lead to lower growth path
* No logic for overshooting policy rates and then cutting
* CAD has come down; its financing is no longer an issue
* Until clear CPI on way to 4%, this may not be end of hikes
JAYANTH VARMA
* Two inflationary risks have come to fore since Feb meeting
* Balance of risks has shifted slightly towards inflation
* Deficient monsoon likely to create inflationary pressure
* Early signals on growth slowdown more visible than Feb
* May need monetary response if crude oil price nears 3 digits
* More tightening won’t be withdrawal of accommodation
* Must be vigilant on overshooting terminal policy rate
* OPEC output cut a worry if it has geopolitical impact
* OPEC output cut, monsoon outlook risks for inflation
* Overshooting terminal policy rate may slow economy too much
* Policy shouldn’t be made by looking at rear-view mirror
* Possible to undertake further tightening
* Real rates must rise more from Feb CPI differential
* Repo rate at same level as start of last easing cycle
* Best estimates show policy steps so far enough to tame CPI
* Increasing concern over patterns that may impact monsoon
* Monsoon-triggered inflation may call for counter measures
* No further withdrawal of accommodation remains to be done
* Policy doesn’t have luxury to respond to growth headwinds
* Will need to wait till May/early Jun for monsoon clarity
* Fail to comprehend meaning of MPC’s policy stance
* MPC had no choice in April but to assume normal monsoon
* MPC needs to keep close watch on evolving crude situation
* Other MPC members say language of stance crystal clear to market
* Must measure real rates from projected CPI 3-4 quarters ahead
* Little scope to bat for higher correct-measured real rate
* Projected fall in CPI to be result of past policy action
* Clear that war against inflation hasn’t been won yet
* Premature to declare an end to tightening cycle
* Need for heightened vigilance in face of fresh risks
* Have reservations, but refrain from dissent on stance
End
Compiled by Vishal Sangani
Filed by Ashish Shirke
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