RBI Minutes Of April 2022 Meeting Shows Discomfort With Inflation: Emkay Global

The minutes of Apr'22 policy reaffirmed the MPC's reaction function pivot, reflecting its discomfort with inflation amid changing macro realities, Emkay Global has said in a report.

"The persistent inflation narrative saw coherence among members, with most believing that, irrespective of the source of inflation (supply or demand side), current high levels require a policy tilt and taming of inflation expectations," the brokerage has said.

"Even though the economic outlook is being impacted by huge global crosscurrents and shifts - the net impact of which is still hard to gauge, the RBI's rhetoric has moved in a hawkish direction. However, most members believe that, amid economic normalization, the gradual rebalancing of liquidity and the move toward equilibrium real rates are consistent with non-inflationary growth. But Dr. Saggar here also reckoned that, amid a flat Phillips curve, tackling inflation becomes harder as it may call for a larger output sacrifice, and thus a deft policy and mix of tools are needed," the brokerage has said.

According to the brokerage, with inflation likely to exceed 6% for three consecutive quarters, especially if energy prices remain elevated, the RBI is likely to get quite perturbed.

"With higher food price pressure in the near term (summer effect, international prices, higher transport costs, supply chains) and persistent input cost pressure in the non-food segment, we see inflation crossing 6% in FY23," the brokerage has said.