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Economy – Monetary Policy - June 2023




  • In the minutes of the June MPC meeting, members displayed a strong focus on achieving the 4% inflation target, acknowledging the uncertain inflation outlook due to risks associated with a weak monsoon.

  • The members emphasized their commitment to reducing inflation to the desired level, recognizing that the process might be gradual and prolonged, as highlighted by Governor Das.

  • Governor Das stated that, while the MPC was still in a cycle of tightening rates, it would be appropriate to pause the rate hike for the current meeting and carefully assess the evolving situation.

  • The majority of MPC members expressed optimism regarding the growth outlook, maintaining a projected real GDP growth rate of 6.5% for FY24, with Governor Das and Dr. Patra noting the steady improvement and broad-based nature of growth prospects.

  • Dr. Ranjan highlighted that economic activity remained strong in Q1FY24, with expectations of continued positive momentum in the subsequent quarters.

  • However, Dr. Varma held a slightly less positive view, pointing out that several high-frequency indicators indicated that growth was not as robust as desired.

  • Given the increasing uncertainty surrounding the monsoon and its potential impact on food inflation, the risks in that regard were seen as tilted towards higher inflation.

  • Additionally, adverse weather conditions affecting rural demand and a potential global slowdown further clouded the growth outlook.

  • Taking these factors into account, our stance remains in favor of the RBI MPC maintaining a prolonged pause in its policy actions.

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