The minutes reveal alarming level of inflation anxiety among MPC members
Download ReportMPC Minutes - Inflation anxiety bites
The RBI published the MPC minutes of the unscheduled policy review held on May 4, 2022 that ended up in a surprise rate action from the RBI. The minutes reveal alarming level of inflation anxiety among MPC members that post facto appear to have been triggered by: Higher than expected CPI inflation print for Mar-22; Persistence of geopolitical pressure on commodity prices; Anticipation of further ascent in CPI inflation in Apr-22; Generalization of inflation pressures; Likelihood of hardening of average CPI inflation to above 6% tolerance threshold in FY23.
The Apr-22 policy review saw the RBI introducing a policy pivot amidst growing discomfort on inflation. The festering of inflation discomfort since then has spawned an urgency in policy response. This we believe will further get manifested in the form of a 35 bps hike in the repo rate in the upcoming policy review in Jun-22, accompanied by a 50 bps increase in the CRR. Thereafter, the MPC could eye the next milestone of pre pandemic level of monetary policy setting, implying further rate action in Aug-22 and Sep-22 policy reviews, taking the repo rate to 5.15% by Sep-22 (same as in Feb-20).