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Discover the MPC

The six-member Monetary Policy Committee (MPC) is headed by Governor Shaktikanta Das. The other members are: Shashanka Bhide, Honorary Senior Advisor, National Council for Applied Economic Research, Delhi; Ashima Goyal, Professor Emeritus, Indira Gandhi Institute of Development Research, Mumbai and Jayanth R Varma, Professor, Indian Institute of Management, Ahmedabad along with RBI Deputy Governor Michael Debabrata Patra and RBI Executive Director Rajiv Ranjan

The committee meets

The Reserve Bank’s rate-setting committee met on Thursday to finalize a report for the government on why it has failed to keep retail price inflation below the 6% target. for three consecutive quarters since January this year, sources said. The report will be presented to the government in accordance with the Reserve Bank of India Act, they added.

Increase in card prices

A rate hike in December by India’s rate-setting panel is still widely expected. However, analysts are divided on the next rate hike, with some seeing another 35 basis point hike in December while others say the next rate move will depend on the data.

SBI report says inflation could hit 7.5%

“In 2019, when unseasonal rains occurred, average food prices more than doubled from 4.9% to 10.9%. December,” said SBI

Consideration of circumstances

The country’s largest bank said in the research note today that unseasonal rains affecting kharif crops now pose another threat to inflation. Along with cereals, the prices of vegetables, milk, pulses and edible oils, which account for more than a quarter of the overall CPI, are rising and are expected to remain high in the coming months.

The story so far…

India’s monetary policy committee opted for a cumulative 190 basis point hike in the policy rate since May, bringing the repo rate down to pre-Covid levels, while the Federal Reserve opted for a steep rate hikes of 75 basis points in each of the last three meetings that lifted borrowing costs in the world’s largest economy to the highest since 2008.

Precipitation Concerns

India’s October rainfall was 44% above normal, the three-month average food CPI was 10.9% compared to 4.9% in the previous 3 months. This indicates that the unseasonal rains could have a significant negative impact on food inflation in the coming months, creating further concerns ahead of the encounter.

Ukraine-Russia shakes up the status quo

The outbreak of conflict has aggravated the commodity bull cycle and nearly wiped out supply chains of key commodities such as coal, metals, edible oils and crude oil, the latter two being essential and major imports. from India.

RBI MPC Meeting News LIVE: Deadlines

The report must be sent to the government within one month from the date the Bank failed to meet the inflation target. Thus, the RBI must submit the report by November 12, as September inflation data was released on October 12.

RBI MPC Meeting News LIVE: Legal Mandate

In accordance with Regulation 7 of the RBI MPC and the Monetary Policy Process Regulation 2016, a separate meeting is to be scheduled by the Secretary of the Committee, as part of the normal political process to discuss and draft the report to be sent to the Government.

RBI MPC Meeting News LIVE: Remedies

As required by law, the RBI will have to explain to the government the reasons for its failure to meet the 2-6% mandate and the corrective measures to address it.

RBI MPC Meeting News LIVE: Inflation Figures

India’s retail inflation hit a five-month high of 7.4% in September, marking the third consecutive quarter that the average print remained above the RBI’s 6% tolerance ceiling and was exceeded the medium-term objective of 4% for three years.

First miss on inflation since 2016

India’s monetary policymakers will meet on Thursday to write a letter to the government explaining why they have failed to keep inflation within a mandatory 2-6% band for three consecutive quarters.

It is the first time the Reserve Bank of India has written such a letter after the country moved to a flexible inflation targeting regime and formed a committee in 2016 to set interest rates. The RBI should detail the steps it is taking to bring inflation back to its target, and those steps can provide a clue to the path of the central bank’s key rate.

As expected

The RBI Rates Panel is expected to hold its next policy review in early December. The central bank expects price gains to return to the target range by the end of the fiscal year in March, as international commodity prices fall.

RBI MPC Meet LIVE Updates: Investors fear

The off-cycle meeting has sparked some anxiety among bond investors, especially as it comes hours after the Federal Reserve raised interest rates by 75 basis points for the fourth consecutive time and signaled that interest rates will go higher than expected, although the trajectory may soon involve small hikes.

First time

It is the first time the Reserve Bank of India has written such a letter after the country moved to a flexible inflation targeting regime and formed a committee in 2016 to set interest rates. The RBI should detail the steps it is taking to bring inflation back to its target, and those steps can provide a clue to the path of the central bank’s key rate.

Growth estimates

Growth is estimated at 7% and inflation would still be lower than in the euro zone, where it is in double digits. In 2013, the year of the taper tantrum and the last Indian currency crisis, inflation in advanced economies was 1.4%, while India suffered 10.1%.

What happened at the last MPC?

The RBI raised the benchmark repo rate, the rate at which it lends to banks, by half a percentage point to 5.9% in its September 30 monetary policy review, inflation at the consumption having remained constantly above the upper tolerance threshold of the 2 to 6% prescribed. interval.

Why is this additional meeting taking place?

The rule was that if the RBI or rather the monetary policy committee is unable to keep inflation within that 2% to 6% range for three consecutive quarters, the RBI will have to convene a meeting of the MPC to discuss the letters to write. to the government explaining three reasons why the monetary policy committee failed, what action it plans to take and how soon it will be able to bring inflation back to that 2-6% range .

Das’ explanation

“We didn’t want to disrupt the recovery process. We wanted the economy to land safely and subsequently bring inflation down,” Das said at a conference on Wednesday. “If we had started the tightening process earlier, what would have been the counterfactual scenario.”

What has happened in the last three quarters?

Pure monetarists would blame him for keeping rates too low for too long, but inflation targeting “while keeping the growth objective in mind” could be partly to blame.

Coming out of a pandemic that shrunk the economy in fiscal 2021, the RBI prioritized growth even if that meant tolerating some inflation.

Three straight quarters of chaos

Inflation which averaged around 3.9% before the pandemic suddenly got out of control. It has not only exceeded the 4% target but is well above the upper tolerance range of 6% for three consecutive quarters, prompting the RBI to write to the government on how it intends to bring it down to 4%. .

Inflation, inflation, inflation

Russia’s invasion of Ukraine in February did things that many central banks – from the Bank of Japan to the European Central Bank – have failed to achieve in years, namely bringing in inflation in their savings. When Inflation came to their doorstep, she turned out to be a monster rather than the angel they had been looking for.

The minutes of the meeting will be made public, no letter to the Center

Reserve Bank of India Governor Shaktikanta Das reiterated on Wednesday that the bank would not publicly disclose its communication to the central government. However, the decision taken at the MPC meeting and the minutes must be published in accordance with the RBI Act.

The Ukrainian conflict at the center of the calamity

“February 24 was a complete game-changer,” RBI Governor Shaktikanta Das said, referring to the day Russian tanks rolled into Ukraine.