High inflation weighed on MPC members as RBI raised rate: Records

Mumbai: All the six members of the MPC, including the RBI Governor, expressed concern over continued high inflation and stressed that the cental bank’s endeavour would be to bring down price rise within the target range, as per minutes of the latest Monetary Policy Committee (MPC) meeting released on Wednesday.

The Reserve Bank’s ratesetting panel, which met during June 6-8, raised the key interest rate by 50 basis points -- the second hike within five weeks. In early May, the policy repo rate was hiked by 40 basis points.

As per the minutes, RBI Governor Shaktikanta Das said while high inflation continues to be the major concern, revival of economic activity remains steady and is gaining traction. The time is appropriate to go for a further increase in the policy rate to effectively deal with inflation and inflation expectations.

“Accordingly, I vote for a 50 bps increase in the repo rate which would be in line with the evolving inflationgrowth dynamics and will help in mitigating the second round effects of adverse supply shocks,” he said. The rate hike, he added, will reinforce the RBI’s commitment to price stability -- its primary mandate and a pre-requisite for sustainable growth over the medium term. Besides raising the repo rate to 4.9 per cent, the Reserve Bank also revised upwards its inflation forecast for the current fiscal to 6.7 per cent from its earlier estimate of 5.7 per cent.

MPC member and RBI Deputy Governor Michael Debabrata Patra said the global inflation crisis is just the face of one of the most severe food and energy crises in recent history that now threatens the most vulnerable across the globe.

With inflation majorly being driven by supply constraints amid the ongoing Russia-Ukraine war, Patra said to gain time for supply to respond, the blunt instrument of monetary policy has to be deployed, and there is no other recourse at this juncture. —PTI