The Reserve Bank of India’s (RBI) Monetary Policy Committee needs to see a decisive decline in inflation over a series of monthly readings before it shifts stance, which would otherwise be premature, deputy governor Michael Patra said on Wednesday while voting along with five other members of the MPC for raising the key lending rate by 35 basis points earlier this month.

Should the incoming information indicate that the recent small easing of inflation is transient rather than the onset of a durable downturn, the MPC should be prepared to respond appropriately in order to achieve the desired inflation objective,” Patra was quoted as saying in the RBI’s latest policy meeting minutes.

Given the uncertain outlook, it may engender a situation where we may find ourselves striving to do a catch-up through stronger policy actions in the subsequent meetings to ward-off accentuated inflationary pressures,” Das said.

The RBI Governor also said that in a tightening cycle, especially in a world of high uncertainty, giving out explicit forward guidance on the future path of monetary policy would be counterproductive.This may result in the market and its participants overshooting the actual play out of real conditions, Das opined.

On withdrawal of accommodation stance, the RBI Governor said that considering the prevailing policy repo rate, liquidity conditions and the expected trajectory of inflation over the next several months, it is essential to persist with the stance of withdrawal of accommodation.

The RBI MPC has recently hiked the repo rate by 35 basis points (bps) to 6.25%. The RBI policy rate is now at its highest level since August 2018.

The RBI MPC has recently hiked the repo rate by 35 basis points (bps) to 6.25%. The RBI policy rate is now at its highest level since August 2018.