MPC members favour caution over pre-emptive rate move amid West Asia uncertainty, show RBI minutes
New Delhi, June 20
Most members of the Reserve Bank of India's Monetary Policy Committee saw little justification for a pre-emptive change in interest rates at the June policy review, arguing that heightened uncertainty around the West Asia conflict, supply chain disruptions and monsoon risks warranted a cautious "wait-and-watch" approach, according to the minutes of the MPC meeting released on Friday.
The six-member committee unanimously voted to keep the repo rate unchanged at 5.25 per cent and retain the neutral policy stance, with several members stressing that the inflation shock remains largely supply-driven and its persistence is still uncertain.
In the minutes, external member Dr Nagesh Kumar said that "prudence requires waiting for greater clarity to emerge on the impact before any monetary policy response."
"One needs to keep an eye on the evolving geopolitical situation in West Asia and its implications for the Indian macroeconomic outlook, especially the growth-inflation dynamics," he said while backing the status quo.
External member Saugata Bhattacharya said the economy faces "multiple overlapping geo-economic shocks" and argued that "risk management is now the most sensible approach to monetary policy responses."
He added that despite concerns over inflation, "I do not see material signals of economic overheating" and that maintaining the current repo rate was "likely to have the lowest economic cost."
Executive Director Indranil Bhattacharyya also argued against a pre-emptive response to rising prices, noting that while wholesale inflation has surged, policymakers need to assess how much of that feeds into consumer inflation.
"While demand-pull inflation may call for pre-emptive action to effectively anchor inflation expectations, cost-push inflation induced by supply shocks warrants greater caution - gradualism - in policy making," he said. "It is prudent to wait for greater clarity to emerge from the data before deciding on any policy action."
Deputy Governor Poonam Gupta similarly backed a pause, saying she did not see a case for tightening policy when growth is expected to slow and inflation has not yet become entrenched.
"It would be prudent to adopt a wait and watch approach rather than make an early or preemptive policy pivot," she said.
The MPC's June projections showed GDP growth for 2026-27 slowing to 6.6 per cent from 6.9 per cent projected earlier, while inflation was revised upwards to 5.1 per cent amid higher oil prices and monsoon-related risks. Against this backdrop, committee members broadly concluded that waiting for more clarity on the duration of the West Asia conflict and its economic impact was preferable to acting prematurely.
— ANI
Reader Comments
Sensible approach by MPC. Keeping repo rate stable helps common man like us - EMIs won't increase immediately. But I hope they're monitoring the situation closely because if crude oil prices spike further, we'll feel it at the petrol pump soon enough. 🛢️
As someone working in the IT sector, I appreciate the cautious stance. Uncertainty in the Middle East affects our clients too. But I'm concerned about inflation projections of 5.1% - that's above RBI's comfort zone. Let's hope the monsoon is kind this year. ☔
Good decision but I wish they'd also address the falling rupee. Even with status quo on rates, if rupee keeps depreciating, imported inflation will hurt us all. Need a more comprehensive strategy, not just monetary policy. 🇮🇳
I agree with the wait-and-watch approach, but let's not forget that small businesses and farmers are already struggling with input costs. Hope the government also steps in with some fiscal measures to ease supply-side pressures. Policy coordination between RBI and Centre is key! 💪
Interesting to see the MPC members all on the same page for once! 😅 But seriously, with GDP growth expected to slow to 6.6% and inflation at 5.1%, it's a tricky balancing act. At least they're thinking about the common person rather than making knee-jerk reactions.
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