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MPC Minutes Show Uncertainty Around Inflation Outlook

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The Minutes of the Monetary Policy Committee Meeting of August 4 to 6, 2020 reveal that there remains uncertainty surrounding the inflation outlook.

A release of the minutes by the RBI revealed that the MPC is conscious that its primary mandate is to achieve the medium-term target for CPI inflation of 4 per cent within a band of +/- 2 per cent. It also recognises that the headline CPI prints of April-May, 2020 require more clarity.

"At the current juncture, the inflation objective itself is further obscured by (a) the spike in food prices because of floods in eastern India and ongoing lockdown related disruptions; and (b) cost-push pressures in the form of high taxes on petroleum products, hikes in telecom charges, rising raw material costs reflected in upward revisions in steel prices and rise in gold prices on safe haven demand. Given the uncertainty surrounding the inflation outlook and taking into consideration the extremely weak state of the economy in the midst of an unprecedented shock from the ongoing pandemic, it is prudent to pause and remain watchful of incoming data as to how the outlook unravels," the release stated.

MPC Minutes Show Uncertainty Around Inflation Outlook
 

On the growth front, the MPC Minutes show that economic activity had started to recover from the lows of April-May following the uneven re-opening of some parts of the country in June; however, surges of fresh infections have forced re-clamping of lockdowns in several cities and states.

"Consequently, several high frequency indicators have levelled off," the RBI Minutes show.

Read more about: mpc inflation
Story first published: Saturday, August 22, 2020, 8:22 [IST]
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