All six members of the RBI rate-setting panel expressed their concerns over the current high inflation situation and emphasised on the need to change the course of price rise trajectory to reach targeted level, according to the minutes of the last MPC meeting released .
The tense global geopolitical situation and the consequent elevated commodity prices impart considerable uncertainty to the domestic inflation outlook, the minutes said.
The RBI Monetary Policy Committee (MPC) decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth, as per the minutes.
“In sum, the inflationary pressures that have intensified since March 2022 are expected to remain a concern in FY2022-23 unless the international supply conditions improve quickly. Changing the course of inflation trajectory to reach targeted level is a priority at this stage for monetary policy although the growth momentum remains modest one,” Shashanka Bhide, one of the MPC members, said.
Monetary policy tightening has begun in a number of economies globally to rein in inflationary pressures, he said adding that fiscal measures to contain the impact of international price spikes to the domestic consumer and measures to improve supply expansion would moderate price pressures.
RBI Governor Shaktikanta Das said the Russia-Ukrine war has globalised inflationary pressures across geographies, and there are increasing risks of long-term inflation expectations getting unanchored.
“Adverse spillovers from high global commodity prices continue to impinge on domestic prices in April and thereafter. Domestic factors also played a role, with a strong heat wave and consequent loss of production resulting in significant pick-up in prices of several food items,” he said.
Retail inflation stood at 7.04 percent in May, easing from a near-eight-year high of 7.79 percent in April. Inflation, however, has remained above the RBI’s medium-term target of 4 percent for 32 consecutive months. It has now spent five months above the 6 percent upper bound of the 2-6 percent tolerance range.
All members of the MPC unanimously voted to increase the policy repo rate by 50 basis points to 4.90 per cent in June policy meeting.
