Highlights from minutes of MPC's Feb 8-10 meeting

Informist, Thursday, Feb 24, 2022

MUMBAI - Following are the highlights from the minutes of the Feb 8-10 meeting of the Reserve Bank of India's Monetary Policy Committee, released by the central bank today:

SHAKTIKANTA DAS

* Continued policy support a must for sustained growth recovery

* Improving inflation outlook provides comfort

* Inflation pressures continue largely from supply-side issues

* Our policy must be attuned to domestic CPI-growth dynamics

* Core inflation remains elevated but demand pressures muted

* Must be watchful of inflation risks from commodity prices

* Surge in crude oil prices requires close monitoring

* Room for optimism on food inflation trajectory over FY23

* Considerable improvement in food inflation outlook

* Likely CPI moderation FY23 gives room to stay accommodative

* Global headwinds turning more adverse

* Growth, inflation trajectories diverge across countries

* Policymaking increasingly complex amid global spillovers

* Must remain agile in this period of prolonged uncertainty

* High-frequency data shows economic activity tempered near term

* High commodity prices, supply crunch may hit margins of companies

* Global market volatility can complicate domestic situation

MICHAEL PATRA

* CPI projected on downward path throughout FY23

* Inflation heading towards an inflection point

* Have seen some let-up in input cost pressures

* Jan CPI high essentially due to unfavourable base effect

* Welcome decline in key food prices since Oct

* Inflation driven higher though economic recovery not yet full

* I feel inflation surge during COVID not on excess demand

* Feel inflation surge during COVID due to supply issues

* Central banks have choice to accept higher inflation for now

* Central banks acting on high inflation now may kill demand

* Monetary policy can stabilise demand-driven inflation

* Monetary policy is an instrument of economic stabilisation

* Monetary policy role is to align demand with supply

* Indian economy encountering headwinds, cross-currents

* Recovery may lose some steam Jan-Mar FY22, Apr-Jun FY23

* Messages from incoming high-frequency indicators mixed

* Goods movement robust in January as per travel, GST numbers

* Mobility of people in India moderated sequentially in Jan

* Power, fuel usage rising, but vehicle registrations down

* Services exports from India doing well

* Food grain, horticulture output seen at new records

* India's agriculture outlook is bright

* India's external sector robust against global spillovers

* Export trends should help keep CAD in sustainable limit

* FDI into India has held up well, slightly down from FY21

* Economic activity seems resilient to Omicron wave

* India FX assets cover three-fourth of all global liability

* India total external debt more than covered by FX reserve

* Global outlook sombre, consumption dented by Omicron wave

* Geopolitical woes, climate transition complicate outlook

* Labour, production disruptions continue globally

* Prolonged global economic slowdown looms

* See risk of global economic slowdown becoming a recession

* Global agencies see growth lose 2% of speed in 2022-23

* Global inflation may take greater part of 2022 to ease

* Global inflation may take longer to slow, "but it will"

* See signs of supply-chain pressures peaking, then easing

* See spare capacities emerge globally in services

* See supply bottlenecks in goods production sector

* Harder to bring supply capacity back on stream

* Biggest economies pulling in opposite policy directions

* See monetary policy chase inflation globally

* Must note India COVID caseload even when optimistic

* Must be cautiously optimistic on recent COVID case fall

* COVID vaccination for rest of Indians to be back-breaking

MRIDUL SAGGAR

* Capex push in FY23 Budget to support growth

* Uncertain if states, PSUs will keep capex high this year

* Monetary policy still has complementary role in growth

* Monetary-fiscal coordination key to avoid inferior outcomes

* Smooth liquidity rebalancing critical for inflation mgmt

* Some high-frequency data show renewed loss of momentum Jan

* Sterilised FX interventions can be key plan if needed

* Built buffers against possible capital outflows

* Must up policy rate when inflation seen turning endemic

* Must raise policy rate when recovery is seen durable

* Receding CPI FY23 to allow keeping policy accommodative

* CPI projected to ease to around 5% Apr-Sep

* CPI seen receding further to 4% target by Oct-Dec

* Must closely watch monsoon outturn, oil price dynamics

* Fear of price rise getting generalised not materialising

* Inflation situation in India not similar to US, UK

* Europe, US, UK have little choice but to raise rates soon

* Europe, US, UK seeing wide gaps over 2% inflation aim

* Global interest rate cycle is decidedly changing

* Emerging markets must brace for tighter financial conditions

* Omicron pushed broad-based recovery further down the time

* Inflation targeting to help lower FX rate risk premia

* Keeping inflation at or near target key for credibility

* Energy price uncertainties have risen considerably

* Must adjust macroeconomic policies if oil prices spike

* Current geopolitical stress in Europe a significant risk

SHASHANKA BHIDE

* FY22 GDP likely to exceed FY20 level by about 2%

* Private consumption spending yet to reach pre-pandemic level

* Boost to consumption needs sustained improvement in jobs

* FY22 capital formation projected to exceed FY20 level

* Growth recovery incomplete so far

* Policy steps crucial to sustain growth momentum

ASHIMA GOYAL

* Real policy rate has risen from negative to near zero

* Food price inflation dominance makes CPI affect WPI more

* Food items dominating CPI more amenable to government action

* Government taking active steps to lower commodity inflation

* Inflation in advanced economies unlikely to spill over to CPI

* Consumption remains below pre-pandemic levels

* Growth in M3 shows current state of demand

* Necessary to continue to stimulate demand for now

* Other nations brace for spillover as big economies normalise

* Proposed capex in Budget to take time to spur demand

* Export growth to remain high despite weak world growth

* Not wise to create more unemployment to reduce inflation

* Investment picking up in some sectors

* Credit growth shows signs of pick-up despite uncertainty

* Markets priced in steeply rising policy rates, spreads up

* Sharp rise in policy rates is unlikely to be required

* Some outflows to give more space to support govt borrow

* Sustained equity outflow unlikely due to growth potential

JAYANTH VARMA

* Had voted against stance on two counts

* Economy is no longer hostage to the pandemic

* A switch to neutral stance is now long overdue

* Harping on combating pandemic is now counterproductive

* Harping on pandemic deflects focus on recessionary trend

* Recessionary trend goes back at least to 2019

* Low reverse repo rate has become a harmless fetishism

* Won't dwell on low reverse repo rate

* Inflation-growth risks appear balanced on both sides

* Fan charts show uncertainty on both inflation, growth

* Policy stance needs to be neutral

* Fan charts show need for a modest rise in nominal rates

* Real rates must stay low but be mildly positive FY23

* Pre-pandemic, economy was growing below potential

* Pre-pandemic GDP situation expected to re-assert itself

* Policy acts with lags, important to eye 3-4 quarters ahead

* Geopolitical tensions bigger risk vs virus for global economy

End

Compiled by Vishal Sangani

Filed Aditya Sakorkar

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