(LiveMint)
Policy watchers surprised by the Reserve Bank of India’s (RBI) decision to hold rates in October against a widely expected hike are fairly certain that this interlude will be over as soon as December.They are probably right. The minutes of the October policy meet show that RBI’s monetary policy committee members did not tone down their hawkishness or reduce their vigil on inflation when they had recommended a pause.
In fact, long-standing hawk and RBI executive director Michael Patra said monetary policy needs to be on “high alert” on inflation. He merely felt that the need to raise rates was less because the past two rate hikes still haven’t reached all corners of the Indian economy.
Chetan Ghate, who voted for a hike, felt that the sharp depreciation of the exchange rate and rise in oil prices would unhinge inflationary expectations, something that RBI cannot afford. This was seconded by deputy governor Viral Acharya. Governor Urjit Patel, too, hasn’t lowered his guard on inflation. The urgency to keep inflation under check is evident despite the headline number consistently coming in lower than the medium term target of 4%.
