The Reserve Bank of India (RBI) on Thursday said it will conduct an additional meeting of its Monetary Policy Committee (MPC) on November 3, 2022. In the meeting, the RBI will discuss its response to the government for failing to contain the retail inflation.
Also Read: Inflation Remains Beyond RBI’s Limit; What Happens If RBI Fails to Meet Inflation Target
“Under the provisions of Section 45ZN of the Reserve Bank of India (RBI) Act 1934, read along with the Gazette notifications S.O.2215(E) dated June 27, 2016, and S.O.1422(E) dated March 31, 2021 and the Regulation 7 of the RBI Monetary Policy Committee (MPC) and Monetary Policy Process Regulation, 2016, an additional meeting of the MPC is being scheduled on November 3, 2022,” the RBI said in a notification on Thursday.
In May also, the RBI conducted its off-cycle monetary policy review to hike the repo rate to control inflation. It had hiked 40 basis points in the review. The RBI conducted its last monetary policy last month (September 28-30), in which it raised the repo rate by 50 basis points. The repo rate currently stands at 5.90 per cent.
According to the Reserve Bank of India Act, 1934, where the central bank fails to meet the inflation target, it shall set out in a report to the central government –– (a) the reasons for failure to achieve the inflation target; (b) remedial actions proposed to be taken by the Bank; 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 next MPC meeting was slated to meet for the last time this calendar year on December 5-7, 2022.
India’s retail inflation accelerated to a five-month high of 7.41 per cent in September. It was the ninth month that the Consumer Price Index (CPI)-based inflation has remained above the RBI’s upper tolerance limit of 6 per cent, and has risen despite the central bank’s efforts to curb it. The retail inflation had stood at 7.04 per cent in May, 7.01 per cent in June, 6.71 per cent in July, 7 per cent in August and now 7.41 per cent in September.
According to the latest RBI MPC meeting’s minutes, RBI Governor Shaktikanta Das said, “Headline inflation, on the other hand, remains elevated and above the upper tolerance band of the target. As per current projections, headline CPI is expected to moderate to 5.8 per cent in Q4 of 2022-23 and further to 5 per cent in Q1 of 2023-24. The future trajectory remains clouded with uncertainties arising from continuing geopolitical conflicts, possibility of further supply disruptions, volatile financial market conditions and domestic weather related factors.”
Voting for remaining focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward, he also said the world is in the eye of a new storm originating from aggressive monetary policy tightening and even more aggressive forward guidance from advanced economy (AE) central banks.
“This has resulted in a tightening of global financial conditions, extreme volatility in financial markets, risk aversion among investors and sharp appreciation of the US dollar. Such market turmoil on top of globalisation of inflation and deglobalisation of trade has hugely negative consequences for emerging market economies (EMEs). Even in AEs, the narrative is increasingly shifting from stagflation to possible recession,” Das said.
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