RBI MPC meet: Central bank to focus on inflation in off-cycle meeting

The Reserve Bank of India (RBI) is set to hold an additional meeting on November 3 (Thursday) under section 45ZN of the RBI Act to focus on bringing inflation within target levels. Section 45ZN of the RBI Act focuses on ‘failure to bring inflation under target.’

The central bank will have to give a detailled report to the Centre explaining the causes behind failure to meet inflation targets and underline future course of action. The central bank will not make the details of the report immediately. RBI governor Shaktikanta Das was quoted by news agency Reuters as saying, "It's a report send under a law, I don't have the privilege, the authority or the luxury to release a letter like this."

Today’s MPC meet will have to explain reasons for missing the targets. CPI inflation has been around 6 per cent in the first 9 months of 2022 and stood at 7.4 per cent in September. The RBI will also have to give a blueprint on bringing back inflation below 6 per cent. This blueprint will focus on reasons behind failure to achieve inflation target, remedial actions proposed and an estimated time period within which inflation target will be achieved. 

While addressing an event on Wednesday, Das said, “No one can match the prowess of Arjuna, but our (RBI’s) constant effort is to keep an Arjuna’s eye on inflation.” He added India would have to pay a heavy price if the central bank began policy tightening earlier than when it did. 

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The RBI bulletin in October also underscored that the fight against inflation will be “dogged and prolonged, given the long and variable lags with which monetary policy operates, and fraught with uncertainties.” The process of bringing inflation under control will be gradual in keeping with the geopolitical and epidemiological events domestically and globally. 

The State Bank of India (SBI) Ecowrap stated headline inflation could hit 7.5 per cent in December since September food inflation stands at 8.4 per cent. It further added this could lead to a rise in repo rate to 6.5 per cent. India’s largest public lender furthermore underscored that the RBI is pushing banks to increase deposit rates to garner deposits or secured funds to finance credit growth. 

Meanwhile, Asian shares and Wall Street slipped in early trade after the US Federal Reserve hiked policy rates by 75 basis points. The US Federal Reserve hiked interest rates by 75 basis points to 3.75 per cent to 4 per cent in a bid to cool inflation. The Fed said, “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.”

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