Collectively, the MPC minutes provide rationale for the policy decision while unveiling few internal deviations in the thinking within the MPC on the expected economic trajectory and the likely policy response.

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Jun 22, 2023

QuantEco Research || MPC Minutes - Paving way for a hawkish prolonged pause

While the doves highlight that monetary policy has been tightened adequately to preserve growth-inflation balance, the hawks hint that a pause in rate tightening in two consecutive meetings should not be misconstrued as a signal for a peak in interest rate cycle. This divide underscores the economic uncertainty with respect to policymaking. We continue to believe that caution is warranted amidst heightened uncertainty (climate risks on inflation, geopolitical spillover impact on supply chains as well on inflation, monetary policy trajectory of systemically important central banks and its impact on INR). This will prevent any policy U-turns as recently seen in case of few advanced countries central banks reverting to rate hikes after signalling a pause, and help preserve overall macroeconomic stability. As such, we continue to maintain our call of a prolonged pause in repo rate (through the course of FY24).