New Delhi
The members of the Monetary Policy Committee, the RBI panel that decides the benchmark interest rates to contain inflation, had expressed their concern over broad-based inflation, and unanimously decided to increase the repo rate by 40 bps ahead of the schedule. The minutes of the meeting held on May 2-4 shows that the members were satisfied with the pace of revival in the economy and they held that the focus of the central bank should be inflation and price stability.
Events since then (April MPC meeting) have led to a further deterioration in the geo-political situation even as domestic inflation became more broad-based warranting immediate remedial measures. The off-cycle meeting held on 2nd and 4th May 2022 may be seen in this background, the RBI governor Shaktikanta Das said in his statement in the meeting.
Another member Dr Rajiv Ranjan pointed out that key drivers of inflation in October 2020 — vegetables, transportation, meat and fish, edible oils, personal care and pulses – had accounted for 60% of the inflation then, but in March 2022, the contribution of these items was only 41%, suggesting a significant change in the drivers of inflation in the recent period. Inflation for four straight quarters has been above the upper tolerance band of 6%, with CPI at 7.79% rising the most in eight years in April on the back of food and fuel prices and core inflation also remaining sticky. MPC also noted the rebound in domestic economic activity is gradually getting generalised.
