Mint Quick Edit | RBI’s rate panel call affirmed its stance

5 months ago 9

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Uncertainty stemming from US tariff policy and the resultant global flux seems to have stayed RBI's hand.

Summary

Minutes of the monetary policy committee meeting held in August reveal the utter uncertainty its members had to grapple with. At the end, they took the best option under today’s economic circumstances.

The monetary policy committee was apparently groping through a haze of uncertainty as it deliberated whether to cut the Reserve Bank of India’s (RBI) policy rate this month, as the minutes of its August meeting released by the central bank reveal.

Also Read: Monetary policy: RBI may pause rate cuts in August

The economy’s growth was seen as resilient, though challenges were discussed. Inflation was within the RBI’s comfort zone. Ordinarily, such circumstances could have spelt a rate cut. But a whole percentage point had been lopped off already.

Also Read: RBI has done well to focus on its core competence: Price stability

Critically, uncertainty stemming from US tariff policy and the resultant global flux seems to have stayed its hand. It was “difficult to provide even a modicum of forward guidance," as panel member Saugata Bhattacharya noted.

Also Read: Mint Quick Edit | RBI policy: Less dovish, more confident

Though there were some nuances that set the views of panel members apart, their broad approach seemed unanimous: wait and watch. How India’s economy will fare needs to be watched closely. In any case, the policy easing of the past needs time for full transmission.

Its status quo decision was consistent with its neutral stance. Now it can make its next move after assessing how the economic scenario evolves. What trade turmoil will do is hard to predict.

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