By Swati Bhat
MUMBAI, April 20 (Reuters) - India's current rate
tightening cycle may not be over as more hikes could be
warranted to align inflation towards the central bank's medium
term target of 4%, minutes of this month's Monetary Policy
Committee (MPC) meeting showed on Thursday.
The MPC, comprising three members from the central bank and
three external members, surprised markets by holding the key
lending rate steady at 6.50% on April 6 in a unanimous decision,
going against expectations for a 25 bps increase.
"It is clear that the war against inflation has not yet been
won, and it would be premature to declare an end to this
tightening cycle," MPC member Jayant Varma wrote.
A poll conducted after the April 6 meeting showed the MPC
will likely keep interest rates unchanged at least until the end
of this fiscal year as it evaluates the delayed impact of
previous hikes on economic growth and inflation.
"We will continue to monitor all incoming information and
undertake forward-looking assessment of the evolving economic
outlook and stand ready to act, should the situation so
warrant," Governor Shaktikanta Das said.
Most members appeared more concerned about inflation than in
their commentary after the previous policy meeting in February
when the bank raised rates by 25 bps.
"Because of erratic weather and continuing global
uncertainties, and until it is clear that inflation is well on
the path to reaching the target, it is necessary to emphasise
that this may not be the end of the rate hikes," MPC member
Ashima Goyal said.
The decision by OPEC+ to cut crude output and the
possibility of weak monsoon rains could both push up inflation
in India and necessitate a monetary policy response, Varma said.
"On the growth front, early warning signs of a possible
slowdown are visible to a greater extent than in February. In
the current situation of high inflation, monetary policy does
not have the luxury of responding to these growth headwinds."
Reserve Bank of India Deputy Governor Michael Patra said the
process of getting inflation back to target could turn out to be
gradual and uneven, but the MPC should shepherd the process
through potential bumps while containing second-round effects
and anchoring inflation expectations.
(Additional reporting by Sudipto Ganguly and Chris Thomas;
Editing by Susan Fenton)
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