Policy watchers surprised by the Reserve Bank of India’s (RBI) decision to hold rates in October against a widely expected hike are fairly certain that this interlude will be over as soon as December.

They are probably right.

The minutes of the October policy meet show that RBI’s monetary policy committee members did not tone down their hawkishness or reduce their vigil on inflation when they had recommended a pause.

In fact, long-standing hawk and RBI executive director Michael Patra said monetary policy needs to be on “high alert" on inflation. He merely felt that the need to raise rates was less because the past two rate hikes still haven’t reached all corners of the Indian economy.

Chetan Ghate, who voted for a hike, felt that the sharp depreciation of the exchange rate and rise in oil prices would unhinge inflationary expectations, something that RBI cannot afford.

This was seconded by deputy governor Viral Acharya. Governor Urjit Patel, too, hasn’t lowered his guard on inflation.

The urgency to keep inflation under check is evident despite the headline number consistently coming in lower than the medium term target of 4%.

Acharya isn’t convinced that the slip in core inflation is material enough. With pricing power of companies increasing, the rise in input costs would swiftly be passed on to the selling price, he noted.

Wholesale price index (WPI) inflation for September surged to 5.13%, indicating the pressure from input prices, a red flag that RBI will notice even though the WPI is not its anchor.

The resolution statement of the monetary policy committee (MPC) said that household expectations for inflation one-year ahead had softened. Both Ghate and Acharya had stressed that the surge in expectations of three-month ahead and six-month ahead inflation was a big worry.

Patel added his weight to the inflation argument by listing out the upside risks to it.

The minutes also show that the MPC is truly focused on inflation. The members of the committee don’t seem to have discussed financial stability at all.

Even the discourse on the external sector has been limited to factors that are directly influencing inflation such as oil prices and the exchange rate. The challenges in financing the current account deficit haven’t been addressed.

The committee is happy with a narrow focus on its mandate for inflation. What RBI cannot afford is to adopt this narrow focus since it is a central bank and has far more diverse responsibilities. Surprisingly, even the RBI members haven’t discussed financial stability.

Close