Home / Economy / High inflation 'a major concern' for economy: RBI sounds caution
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According to the minutes of the RBI Monetary Policy Committee (MPC) meeting released by the central bank on Wednesday, Governor Shaktikanta Das has cautioned that continued high inflation is a major concern for the economy, even as economic activities are gaining traction while voting for a 50 basis points hike in key interest rate to check price rise earlier this June.

The six-member MPC, headed by the RBI governor, had voted unanimously to hike the benchmark interest rate by 50 bps to 4.9%. It was the second consecutive hike in repo rate. 

As per the minutes of the three-day MPC meeting between 6-8 June, Das said while high inflation continues to be the major concern, revival of economic activity remains steady and is gaining traction.

The central bank Governor said, “The time is appropriate to go for a further increase in the policy rate to effectively deal with inflation and inflation expectations."

"Accordingly, I vote for a 50 bps increase in the repo rate which would be in line with the evolving inflation-growth dynamics and will help in mitigating the second round effects of adverse supply shocks," he said.

The rate hike, Das stated, will reinforce the central bank's commitment to price stability – its primary mandate and a pre-requisite for sustainable growth over the medium term.

How does the RBI MPC function?

The monetary policy committee of the central bank is a six-member panel which sets the repo rate.

Out of the six members, three are internal – including the RBI governor who chairs the committee. RBI’s deputy governor is the second internal member. The third member is one RBI official who is nominated by the central board of RBI. Usually, it's the executive director in-charge of monetary policy.

The other three are external members who are appointed for four years.

According to the central bank, the MPC constituted by the Centre under Section 45ZB determines the policy interest rate required to achieve the inflation target. RBI’s Monetary Policy Department (MPD) assists the MPC in formulating the monetary policy.

The main objective of the MPC is to maintain price stability while keeping in mind the objective of growth.

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