Will the views of RBI MPC members converge or diverge at Nov 3 meeting?

Will there be unanimity amongst the members of the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on the decisions to be taken at their November 3 meeting is the question that pops up.

The reason being that at the MPC meeting held in September, one member voted against the resolution hiking the repo rate by 50 basis points to 5.90 per cent.

And in the August meeting too there were differences of views on the resolution that was passed.

“Even at the upcoming meeting each one will have a view which will be considered by the RBI is what I believe. That will be put in the letter to the Central Government,” a senior economist told IANS preferring anonymity.

The RBI has scheduled the November 3 meeting of MPC under Section 45ZN of the RBI Act.

As per the said Section, when the RBI fails to meet the inflation target, it shall send a report to the Central government listing: (a) the reasons for failure to achieve the inflation target; (b) remedial actions proposed to be taken by it; and (c) an estimate of the time-period within which the inflation target shall be achieved pursuant to timely implementation of proposed remedial actions.

The MPC at its upcoming meeting will discuss what it would tell the Centre as to why it was not able to restrain the inflation.

The RBI may also sound out the Central government as to the course of inflation as well as the reasons as to why it may be at the elevated levels.

In India, the retail inflation rose to 7.41 per cent in September.

At the MPC meeting held in September, Dr. Ashima Goyal voted against the resolution to hike the repo rate by 50 basis points to 5.90 per cent.

Goyal was for a hike of 35 basis points and explaining his reasons voted against the resolution.

However, the resolution was passed by a 5:1 majority.

At the same meeting, another member Prof. Jayanth R. Varma voted against the second part of the resolution on the withdrawal of accommodation to ensure inflation remains within the target.

Varma said the MPC should now pause rather than focus on further tightening .

On the issue of upward rate revision, he was for upward revision by 60 basis points instead of 50 basis points that was proposed.

As the difference between the two was only marginal Varma voted in favour.

RBI Governor Shaktikanta Das had said the communication with the central government is a privileged one and it will not be made public by the Bank.

However as per Section 45ZL of the RBI Act, the minutes of the MPC meeting has to be published.

(Venkatachari Jagannathan can be reached at v.jagannathan@ians.in)

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