MPC’s hawkish undertone due to external developments, says Citi
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
The hawkish undertone of Reserve Bank of India’s (RBI) monetary policy committee (MPC) may due to external developments, said Citi after the central bank came out with the minutes of its meeting.
The hawkish undertone of Reserve Bank of India’s (RBI) monetary policy committee (MPC) due to external developments, said Citi after the central bank came out with the minutes of its meeting.
In an exclusive interview to CNBC-TV18, Samiran Chakraborty, chief economist, said, “Majority of the committee members felt that achieving the four percent (consumer price index target) mark is important and we felt that there was some kind of an urgency to get to that four percent mark.”
“The committee almost indicated that the recent slowdown in the consumer price index (CPI) numbers will be ignored and they will look at the pickup in the latter part of the year which worries them the most,” Chakraborty said.
According to him, the reasons for the rate hike were pretty obvious: comfort on growth, minimum support price (MSP) related worries and inflation expectations. However, interesting to observe is MPC’s commitment to get to four percent target as soon as possible.
Chakraborty said that two members mentioning need to maintain neutral was due to global uncertainty.
Talking about current account deficit, Chakraborty said, “We are working with about $75 per barrel average oil price for the year, which is our house view. We have upped a little bit our gold import numbers from about 30 billion to about 36 billion, because of the recent trends showing a slightly higher gold import number.”
“Now it appears that the MPC will not like to tolerate deviation from their four percent medium-term target particularly, when this is a four year term of the MPC which ends in September 2020. So if by 2019 it does not come to fore, then for majority term of this committee inflation will stay much beyond their target range. So that could prompt a little bit more tightening than usual and that is why we are baking in 25-50 bps of more rate hikes at this juncture, not so much before of currency defence but more because of inflation,” he added.
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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow
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