MPC opts for 'wait and watch’ amid growth, inflation uncertainties

All six members of the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) favoured a wait-and-watch approach as they voted for a status quo on benchmark interest rates earlier this month, citing high uncertainty over the trajectory of inflation and growth prospects due to the West Asia conflict, according to the minutes of the MPC meeting released on Friday.  

The MPC meeting was held from June 3 to June 5. Governor Sanjay Malhotra, who chairs the committee, as well as the five other members voted to keep the benchmark interest rates unchanged at 5.25%.  During the meeting, Malhotra opined there was high uncertainty in the assumptions made for projections of both inflation and growth on account of reasons such as the duration of the West Asia conflict and the disruption in supply chains, the intensity and geographical spread of monsoon rains and their impact on energy, food and other commodity prices.  

"I would prefer to adopt a wait-and-watch approach," he said.  The minutes showed the central bank's Deputy Governor Poonam Gupta too felt the need to wait a bit more for global as well as weather-related uncertainties to play out over the coming months, before taking a call on whether and when to reverse the policy cycle.