MPC minutes explain rationale behind RBI action: Off-cycle rate hike done to avoid tougher move in June

Waiting until the planned monetary policy meeting in June would have meant wasting time and opting for a tougher measure, RBI Governor Shaktikanta Das warned MPC members before they unanimously opted to raise interest rates off-cycle on May 4.

Das said the off-cycle monetary policy actions were aimed at lowering inflation and anchoring inflation expectations in order to strengthen the economy's medium-term growth prospects and protect the purchasing power of the weaker sections of society, according to the minutes of the Monetary Policy Committee (MPC) meeting held from May 2-4.

External member of the MPC Jayanth R Varma believes that rate hikes of more than 100 basis points should be implemented as soon as possible. According to the minutes of the meeting issued on Wednesday, he, like the other five members, voted in favour of raising the policy repo rate by 40 basis points to 4.40 percent.  An off-cycle policy meeting has become required. "Waiting one month until the June MPC would mean wasting that much time while inflationary pressures from the war intensified. It may also need a much greater action in the June MPC, which may be avoided "Das said.

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