MPC: Bold Rate Cut Clear Growth Signal

Rate cut safe move; no signs of demand-pull inflation

- KSHIPRA PETKAR Mumbai, June 20

With the inflation outlook expected to be benign, members of the Monetary Policy Committee said that it was essential to cut repo rates in order to support growth, as per the minutes released by the Reserve Bank of India (RBI) on Friday.

Governor Sanjay Malhotra, along with Nagesh Kumar, Ram Singh, Rajiv Ranjan and Poonam Gupta, voted to decrease the policy repo rate by 50 basis points to 5.50%, while Saugata Bhattacharya voted for a 25 bps cut in repo rate.

The apex bank reduced the policy repo rate by 100 bps in quick succession since February, and under the current circumstances, monetary policy is left with very limited space to support growth, the release said.

Hence, all six MPC members agreed to change the stance from 'accommodative' to 'neutral'.

Malhotra said that even though growth is steady, it is lower than the aspirations, and the outlook for inflation is more benign than what they had anticipated in the April policy.