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Monetary panel minutes signal a hawkish RBI in the offing
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SME Times News Bureau | 20 Apr, 2018
The RBI has signalled the prospect of a more hawkish stance on interest
rates despite lowering its inflation forecast for the current year at
its first monetary policy review of the fiscal earlier this month,
according to the minutes of the central bank's latest Monetary Policy
Committee (MPC) meeting here released on Thursday.
On April 5,
the Reserve Bank of India (RBI) maintained the status quo on its repo,
or short-term lending rate for commercial banks, at 6 per cent for the
fourth bi-monthly review in succession, along with its 'neutral'
stance.
The released minutes showed that RBI Deputy Governor
Viral Acharya is likely to vote for "withdrawal of accommodation" when
the MPC meets in June.
"Since the last MPC meeting, I have moved
substantially closer to switching from the neutral stance to beginning
the process of withdrawal of accommodation. This is in spite of the
softening of inflation in recent prints," said Acharya as per the
minutes.
"I view the (Inflation) risks as tilted significantly
to the upside given the continuing rise in the ex-food-and-fuel
inflation. Besides oil prices, my another primary concern is the risk of
fiscal slippages, at both the Centre and state levels.
"It is
important to let some more hard data come in, especially on growth, and
allow some more time to let the early skirmishes on the global trade
front play out," he said.
As per official data, retail inflation
based on the consumer price index (CPI) eased marginally to 4.28 per
cent in March, from 4.44 per cent in February, but remained outside the
RBI's medium-term target of 4 per cent.
In a repeat of the
previous policy review in February, five members of the MPC, including
the three external ones and the Governor, voted in favour of the
decision, while RBI Executive Director Michael Patra voted for an
increase in the repo rate by 25 basis points. The MPC statement
after the meeting said the recent volatility in global crude prices has
brought considerable uncertainty to the near-term inflation outlook.
"Does
it present a persuasive case for an easier/neutral monetary policy
stance? It is important to recognise that volatility in the prices of
vegetables is obscuring a clearer evaluation of underlying inflation
pressures," according to the assessment by Patra.
According to
RBI Governor Urjit Patel, the inflation outlook faces several
uncertainties emanating from the increase in minimum support prices for
kharif crops, volatile crude oil prices, "the staggered impact of
revision in HRA by various state governments, fiscal slippages by the
Centre and the states and the performance of the monsoon".
"I
would like to wait for more data and watch how various risks to
inflation evolve, going forward. I, therefore, vote for holding the
policy repo rate at the current level and maintaining the stance as
neutral," Patel said.
External member Ravindra Dholakia also cited several uncertainties around the inflation forecast, as per the MPC minutes.
"There is hardly any evidence on employment growth picking up to a level that would put upward pressure on the wage growth.
"Fears
of a trade war among major global players are turning increasingly
realistic with likely adverse impact on our exports and costs of
production. It may severely affect our growth recovery over the coming
year," he said.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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