Informist, Friday, Oct 20, 2023
MUMBAI – Following are the highlights of the minutes of the Oct 4-6 meeting of the Reserve Bank of India's Monetary Policy Committee, released by the central bank today:
SHAKTIKANTA DAS
* External sector remains manageable despite global headwinds
* Headline inflation vulnerable to recurring food price shocks
* Intensity of food price shocks up due to adverse weather
* Supply-side shocks making high inflation more transient
* Declining core inflation a silver lining
* Cut in LPG price aided moderation in inflation in September
* Inflation outlook continues to be beset with uncertainties
* Monetary policy must remain actively disinflationary
* Banking system liquidity to remain adequate in coming months
* Maintained flexible, adaptive approach to liquidity management
* Will undertake necessary ops to actively manage liquidity
* Our fundamental goal is to anchor inflation expectations
* Our fundamental goal is to align inflation with 4.0% target
* Domestic economic growth maintaining momentum
* Active management of liquidity will include OMO sales
* Time, quantum of OMO sales will depend on system liquidity
* Hard earned macroeconomic stability needs to be preserved
* Monetary policy has to remain extra alert, ready to act
* Global economic activity slowing as financial conditions tight
* Global economic activity proving more resilient than expected
* Headline inflation in major economies easing but above target
* Monetary policy to remain tight for longer in major economies
* Growth remains uneven in many major economies
* Indian economy remains resilient against global challenges
* India poised to become new growth engine of the world
* Balance sheets of banks, corporates strong, healthy
* Festival season to provide impetus to household spending
* Private sector investment rising as input cost pressures easing
* Consumer outlook surveys turned more optimistic
* Manufacturing, services PMI hint at healthy expansion
MICHAEL PATRA
* Discretionary spending not rising due to high inflation view
* Comapnies' sales growth slow on lower discretionary spending
* Jul-Dec CPI path buffeted by perishables' price shocks
* Spike in headline CPI unacceptable for welfare of society
* "Transitory" shocks from perishables test policy responses
* "Transitory" shocks from perishables test our buffers
* "Transitory" shocks recur with disturbing force
* "Transitory" shocks recur with high intensity
* To monitor September, October CPI prints to look for projected fall
* Strong, stable growth stems from durable taming of CPI
* Growth to gather positive momentum Jul-Sep onwards
* Aim for disinflationary policy, not overly restraining
* Price stability accorded primacy in monetary policy
* Can turn to growth only if prices stable on enduring basis
* Without price stability, growth cannot sustain
* Inflation fight after Ukraine war arduous, herculean
* Inflation fall since Apr-Jun 2022 grudging, underwhelming
* Anchoring inflation expectations incomplete, uncertain
* Growing evidence inflation undermining growth
RAJIV RANJAN
* Need to closely watch rising crude price, US yields, dollar
* Curbing food price key to retain 5.4% CPI aim during FY24
* Moderation of services inflation to close to 4% a relief
* High vegetable rate not deterred CPI expectation anchoring
* Waning of transitory food price shock to help meet CPI aim
* Ongoing transmission of policy steps to help meet CPI aim
* Govt's supply side measures to help meet CPI aim
* Must guard against risks from weather-related events
* Must guard against risks from high global energy prices
* Optimism on demand for mfg goods high
* Consumer confidence outlook also improved significantly
* Services sector growth continues to remain robust
* Overall savings of households expected to hold steady
* Higher investment, income would reinforce higher savings
* Worry on statistical discrepancy in Apr-Jun GDP unfounded
* Need to improve GDP estimates from expenditure side
* Supply shocks run risk of drift in inflation expectation
* Temporary bouts of inflation may be looked through
* To see supply shocks don't trigger generalised price rise
* Sustained core CPI fall vouches for transitory nature
* Policy needs to persevere with disinflationary approach
* Policy needs to remain watchful, ready to act when needed
* Stance status quo to facilitate past hikes' transmission
SHASHANKA BHIDE
* Jul-Aug CPI rise seems transitory; price pressures remain
* Uneven rainfall this year source of concern for food prices
* Govt policy steps to ease food supply-demand mismatch
* Favourable rabi weather crucial to keep food CPI moderate
* Surveys show input price pressures in mfg, infra Oct-Mar
* Global fuel, energy price volatility a short-term concern
* Short-term worry over firm prices of some food commodities
* High Jul-Aug CPI moderated urban household spend optimism
* Demand condition to sustain growth momentum seen in August
* Uncertain global conditions pose downside risks to growth
* Growth momentum to sustain FY24 on stable demand condition
* Growth pace to sustain FY24 despite weak external sector
* Growth momentum to sustain FY24 despite erratic monsoon
* Necessary to assess growth, CPI outlook in medium term
JAYANTH VARMA
* Real interest rate high enough to glide CPI to 4% target
* Continue to have same reservations on stance as in past
* Would prefer stance where words are consistent with actions
* Market needs guidance on how long terminal rate will be high
* Market doesn't need guidance on terminal repo rate level
* MPC must communicate intent to keep real rate high for CPI aim
* Risks to inflation up but only slightly, since Aug meet
* Small shortfall in rains may cause food price volatility
* Volatile food prices may cause short-lived inflation spike
* Slowing world economy places limit on upswing in crude price
* Growth outlook modestly up on higher consumer confidence
* Medium term growth outlook seen stronger than Aug meet
* Changes in inflation, growth outlook quite modest
* Real repo rate is already quite high
ASHIMA GOYAL
* Global economic picture continues to be mixed
* Some export-dependent industries have slowed
* Indian growth trends continue to be mixed
* Global growth may fall FY24 but turnaround possible FY25
* Some surveys hint election uncertainty may delay projects
* Many indicators hint revival in private investment
* Pent-up demand waning for services but remains robust
* There are some indicators of strong domestic demand
* PMIs continue to be high
* Transmission to deposit rates delayed, but happening now
* Gross household financial savings remain high
* Sudden rise in household debt can be a concern
* Best to restrain over-enthusiasm in good times
* After over a decade, signs of revival in invest visible
* No excess lending or infra boom but a healthy gradual rise
* Important to ensure sustained, sustainable invest revival
* Prudential tightening can curb sudden rise in household debt
* Despite inflation spikes, news on inflation favourable
* Most banks trying to increase retail loans
* Govt taking many supply-side steps to reduce inflation
* FY24 CPI forecast gives comfortably positive real repo rate
* Too much and too little liquidity has adverse effects
* OMO buy/sales that affect durable liquidity may be needed
* Liquidity aligned to stance ups impact of rate change
* Need to address impediments to an active call money mkt
* Analysts concerned over falling rate differential with US
* Market understands Indian macros relatively stable today
* No rate hike needed unless 2nd round supply shock effect
* FX borrow, debt inflow continue despite narrow rate gap
* Stable currency, higher growth view keep FPIs in India
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