MUMBAI: The Oct Monetary Policy Committee minutes show that the governor and RBI members were more hawkish than the two external members, who favoured retaining the ‘neutral’ stance rather than shifting to ‘calibrated tightening’, arguing that inflation was driven predominantly by supply-side factors.RBI’s MPC voted unanimously to raise the repo rate by 25 basis points to 5.5%, but split 4-2 on shifting to calibrated tightening, signalling rate cuts were off the table in the near term as inflation threatens to spread beyond food and fuel. Governor Sanjay Malhotra, deputy governor Poonam Gupta, executive director Indranil Bhattacharyya and external member Saugata Bhattacharya backed the shift. External members Nagesh Kumar and Ram Singh favoured retaining the neutral stance, citing supply-driven inflation and growth risks.Calibrated tightening signals that “rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause, depending on the evolving circumstances and the outlook,” Malhotra said. The duration and extent of any rate-hiking cycle would depend on underlying inflation, the spread of price pressures, second-round effects of supply shocks and demand conditions.“While inflation is driven largely by supply-side factors and does not show any signs of overheating of the economy nor of generalisation, it is important to manage inflationary expectations,” Kumar said. He favoured a 25-basis-point rate hike but said a neutral stance remained appropriate amid geopolitical and trade policy uncertainties.Singh warned that shifting to calibrated tightening could signal an extended rate-hiking cycle and undermine the benefits of recent growth-supportive monetary and fiscal policies.
