‘RBI opted off-cycle rate hike to avoid tougher action in June’

The RBI Governor says as several storms hit together, ‘our monetary policy response should be seen as an important step to steady the ship’

MUMBAI: Waiting for the scheduled monetary policy meet in June would have meant losing time and opting for a stronger action, RBI Governor Shaktikanta Das told members of the MPC before they unanimously decided to go for an off-cycle hike in interest rate on May 4.

According to the minutes of the Monetary Policy Committee (MPC) meeting held from May 2-4, Das said the off-cycle monetary policy actions were aimed at lowering inflation and anchoring inflation expectations with a view to strengthening the medium-term growth prospects of the economy and protecting the purchasing power of the weaker sections of society.

The timing of the decision of the Monetary Policy Committee (MPC), which has six members including Das, surprised markets even though rate hike was expected in the wake of spiralling inflation.

The MPC ‘s external member Jayanth R Varma opined that more than 100 basis points of rate increases needs to be carried out very soon. Though like the rest of the five members, he too had voted in favour of increasing the policy repo rate by 40 basis points to 4.40 per cent, as per the minutes of the meeting released on Wednesday.