MPC members expect more rate hikes in future
With a view to tackle inflation, the members of the monetary policy committee (MPC) of the Reserve Bank of India (RBI) have hinted on more interest rate hikes in the coming months, showed the minutes of the June 2022 policy review. The MPC hiked the policy repo rate by 90 basis points (bps) in May and June to 4.9 per cent. MPC member Michael Patra suggested to watch the direction of inflation, not its level. According to him, inflation should reach the four per cent target in 2023-24 after moderating to six per cent by the fourth quarter of 2022-23. Rajiv Ranjan, executive director of the RBI, said that given inflation expectations in India are largely adaptive or backward looking, persistent supply disruptions and the resulting price pressures could get entrenched in higher inflation expectations. According to another MPC member Ashima Goyal, at the current stage of recovery, the one-year ahead real rate must not be more negative than minus one per cent. A fifty or sixty basis point hike would help achieve this, she added. External member Prof Jayanth R Verma opined that more needs to be done in the MPC’s future meetings to bring the real policy rate to a modestly positive level consistent with the emerging inflation and growth dynamics.