MPC Minutes: Just a Couple of Things
Tamal Bandyopadhyay
Consulting Editor, Business Standard & Senior Adviser, Jana Small Finance Bank. Linkedin Top Voice in 2015 & 2019
The Minutes of the Monetary Policy Committee Meeting February held between 3 and 5 has been out.
The theme of what all six members have spoken is on the expected line -- the threat of inflation looms over the medium term but the accommodative monetary stance will continue even in the next financial year as Priority No 1 for the Reserve Bank of India is GROWTH.
That's fine. A couple of things may call for special attention.
One: This speech of Prof Jayanth R Varma is the shortest ever by any MPC Member in its history.
"I support maintaining the policy rate at its current level and I also support the accommodative stance as these decisions are consistent with the forward guidance provided by the MPC in its last two meetings (October and December 2020). With both inflation and growth outcomes being well within the range of expectations of the MPC, and short term interest rates being within the corridor defined by the repo and reverse repo rate, there is nothing to be done and there is nothing to be said as of now. The MPC must of course continue to be data driven and must continue to monitor future developments carefully."
Brief and to the point.
Two: The concluding parts of Bhide's speech and that of RBI Governor Shaktikanta Das is identical.
Here is what Bhide has said:
"I vote in support of the resolution to keep the policy repo rate unchanged at 4 per cent and further to continue with the accommodative stance as long as necessary – at least during the current financial year and into the next financial year – to revive growth on a durable basis and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward."
"On balance, I vote to keep the policy repo rate unchanged and to continue with the accommodative stance as long as necessary – at least during the current financial year and into the next financial year – to revive growth on a durable basis and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward."
I wonder how could this happen! Any thoughts?
Independent Consultant | HR Development, Team Building
3 年Prof Varma is certainly known for making his views crystal clear and with candour!
Vice President, Sytematic/Quant Trading Strategies, Global Markets, Nomura
3 年I wonder if its time to increase the repo rates given persistent high core inflation. The headline inflation is masked by a one-off low food inflation reading, and has the potential to spiral into higher digits once this reverses. Persistent high inflation endangers the hard earned credibility by MPC based on inflation targeting framework.
CEO & Director at Microfinance Industry Network (MFIN) I Professor, Public Policy & Governance, MDI (On EOL) I Boards/Governing Council: South Asia Microfinance Network (SAMN)/BFSI Sector Skill Council of India
3 年Inflation on up-petrol prices to add to it, rate cut having hurt senior citizens and lower middle class and inability of lower rates to spur investment-demand cycle calls for a rethink. The problem lies elsewhere (lack of effective demand, lower consumer confidence resulting in less appetite for borrowings though banks are flush with liquidity), which cut in lending rates wont solve. It will go with abatement of COVID, structural reforms and stable business environment - no quick fix. Wondering - Do Policy directions actually flow from MPC and Mint Street?
Freelancer - Skills Development, Evolving, Learning always in Beta mode
3 年It can happen when you good knowledgeable people on MPC!