By Swati Bhat
MUMBAI, Feb 22 (Reuters) - Price pressures in India
remain high and it would be premature to lower the guard on
inflation, majority of the members of the Reserve Bank of
India's (RBI) monetary policy committee (MPC) wrote according to
minutes published on Wednesday.
Earlier in February, the MPC hiked the key repo rate by a
quarter percentage point, as expected, but surprised markets by
leaving the door open to more tightening, saying core inflation
remained high.
"It will be premature to pause when there are no definitive
signs of slowdown in inflation, particularly core inflation,"
RBI executive director and MPC member Rajiv Ranjan wrote.
"Nevertheless, as the policy rate adjusted for inflation has
now turned positive, albeit barely so, there is a case for
paring down the pace of rate hike to the usual 25 bps," he
added.
Persistently high core inflation is a crucial concern at
this stage, said external member Shashanka Bhide.
"It is important to reduce the demand side pressures on
inflation and bring the inflation expectations of the various
stake holders closer to the policy target to sustain the growth
momentum".
India's annual retail inflation rate rose to
6.52% in January from 5.72% in December, breaching the central
bank's upper threshold for the first time in three months, on
higher food prices.
The monetary policy stance will need to remain
disinflationary till inflation is returned to target, RBI deputy
governor Michael Patra said.
External members Jayant Varma and Ashima Goyal, however,
voted against the decision to raise the key repo rate.
"In the second half of 2022-23, monetary policy has, in my
view, become complacent about growth, and I fervently hope that
we do not pay the price for this in terms of unacceptably low
growth in 2023-24," Varma said.
The MPC is mandated to bring retail inflation down to 4%
over the medium term, while keeping it within the target band of
2%-6%.
Goyal, warned that as the aggressive MPC tightening is more
fully passed through, it will further reduce demand.
"It is better to give time for possible softening of both
inflation and growth and effects of past monetary tightening to
play out," she said.
(Additional reporting by Siddhi Nayak, Sudipto Ganguly and
Chris Thomas
Editing by Mark Potter)
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