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RBI releases MPC minutes: Accommodative stance to continue

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The Reserve Bank of India is likely to maintain its accommodative monetary policy stance but a faster-than-expected recovery in growth is limiting the scope for further rate cuts, the minutes of the monetary policy committee (MPC) meeting said.

The Reserve Bank of India is likely to maintain its accommodative monetary policy stance but a faster-than-expected recovery in growth is limiting the scope for further rate cuts, the minutes of the monetary policy committee (MPC) meeting said.
The MPC left key interest rates unchanged this month amid persistently high inflation but said it would ensure ample liquidity to stressed sectors to keep India's nascent economic recovery on track.
"With growth gaining cyclical momentum, the window available to the MPC to look through inflation pressures is narrower than before," deputy governor and MPC member Michael Patra wrote in the minutes released on Friday.
The Indian economy contracted by a smaller-than-expected 7.5% in the September quarter while retail inflation eased to 6.93% in November but stayed well above the RBI's mandated 2%-6% target range.
"High inflation remains a risk but easing these pressures requires easing supply conditions," wrote Shashanka Bhide, member of the MPC.
Most members, however, believe inflation remains transient and is largely due to supply-side factors and should start easing post-December.
A late November poll showed economists expect one last rate cut by the MPC in the April-June quarter.
"Though monetary policy so far has provided a bungee cord to the growth, its tensile strength depends on how inflation evolves ahead," another member Mridul Saggar wrote.
(Text input: Reuters)

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