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RBI panel warns on inflation as it monitors growth

Mumbai: Minutes from the Reserve Bank of India’s meeting this month showed monetary policy committee members expressing concerns about accelerating inflation, although that was also tempered by uncertainty about the strength of an economic recovery.
The MPC voted 5-1 at the meeting to keep the policy rate on hold at 6.0 per cent and to retain its “neutral” monetary policy stance. RBI Executive Director Michael Patra was the sole member to vote for a 25 basic point hike.
The minutes released on Wednesday showed widespread concerns among the six MPC members about inflation, which accelerated to a 17-month high of 5.21 per cent in December from a year earlier, driven higher by food and energy.
Although data after the RBI meeting showed inflation easing to 5.07 per cent in January, that remains well above the central bank’s 4 per cent target.
The MPC members expressed concern about continued inflationary risks, citing factors including high food and global crude prices and the government’s decision to increase spending for the year starting in April to support a struggling agricultural sector.
But most also appeared mindful of wanting to see a stronger economic recovery, despite promising signs. The government has projected growth could accelerate to 7 to 7.5 per cent in 2018-19 after expanding at its slowest in three years. India will next report growth data on February 28.
“Although inflation risks have increased in recent months, incoming data should provide greater clarity about the persistence of inflationary pressures,” RBI Governor Urjit Patel was quoted as saying.
“The economic recovery is also at a nascent stage and calls for a cautious approach at this juncture.”