MPC minutes stress caution amid inflation concerns

latest minutes from Monetary Policy Committee (MPC) delve upon importance of remaining vigilant against inflationary pressures, despite nation's progress in curbing inflation, according to Governor Shaktikanta Das.

In minutes of April policy meeting released on Friday, Governor Das highlighted potential vulnerability of inflation trajectory to frequent supply-side shocks, cautioning against complacency in monetary policy decisions.

During meeting earlier this month, six-member committee opted to maintain main lending rate at 6.5 per cent, aligning with market expectations. decision to keep rates unchanged was supported by five out of six MPC members, with stance of 'withdrawal of accommodation' retained by a similar margin of votes.

However, external member Jayanth Varma dissented, vocating for a 25 basis points rate cut for second consecutive meeting. Varma expressed concerns about current real interest rate, which he deemed excessive, and emphasized potential growth sacrifice associated with high interest rates.

While central bank has projected a 7 per cent growth rate for fiscal year beginning in April, concerns remain regarding impact of global developments on India's inflation outlook. Recent tensions in Middle East could exacerbate global oil and commodity prices, potentially leing to imported inflation in India.

Deputy Governor Michael Patra stressed importance of maintaining downward pressure on inflation until a clearer picture emerges, acknowledging uncertainty clouding near-term economic landscape.

Governor Das echoed se sentiments, highlighting impact of overlapping food price shocks on both heline and core inflation. Despite retail inflation easing to 4.85 per cent in March, below forecasted 4.91 per cent, central bank remains cautious about potential inflationary pressures.

Analysts at Morgan Stanley stressed that interest rate cuts are unlikely in current fiscal year, given Federal Reserve's policy stance and India's robust growth trajectory.

(With Reuters inputs)