The RBI’s MPC minutes of the policy review on Aug 8th -24 that saw status quo on rates, with repo rate at 6.50%, provide rationale for the policy decision while revealing the internal deviations in thinking within the MPC on the expected economic trajectory and the likely policy response thereof.
Download ReportQuantEco Research || MPC Minutes - Doves vs. Hawks
Tin the published MPC minutes, at a broader level there was consensus on comfort on headline inflation and importance of a good monsoon. However, the divergence between the doves (2 out of 6) and the status-quoists (4 out of 6) seems to be stemming from their perception on anticipated growth conditions. While the doves believe it is prudent to avoid future growth sacrifices by proactively finetuning the nominal policy rate downwards, the status-quoists prefer to use the latitude provided by the underlying strength in growth to continue focusing on aligning inflation with the 4% target on a durable basis.
We continue to expect the internal members of the MPC to maintain their anti-inflation posture and believe that a pivot towards easing is likely in Q3 FY25 assuming food inflation pressures subside in the coming months. We foresee cumulative 50 bps space for monetary easing in H2 FY25.