The Reserve Bank of India (RBI) on Thursday released the minutes of the Monetary Policy Committee’s meeting held from February 5 to 7, 2019 in Mumbai.

On February 7 meeting, the central bank had cut the repo rate by 25 basis points in its sixth bi-monthly policy. One basis point is a hundredth of a percentage point.

With this, the repo rate stands at 6.25 percent. The reverse repo rate has also been adjusted to 6 percent. All six MPC members voted in favour of change in stance to 'neutral' from 'calibrated tightening', which was expected by most experts and economists.

The MPC notes that the output gap has opened up modestly as actual output has inched lower than potential. Investment activity is recovering but supported mainly by public spending on infrastructure. The need is to strengthen private investment activity and buttress private consumption.Monetary Policy Committee members

Dr Chetan Ghate, Professor, Indian Statistical Institute.

Dr Pami Dua, Director, Delhi School of Economics.

Dr Ravindra H Dholakia, former Professor, Indian Institute of Management, Ahmedabad.

Dr Michael Debabrata Patra, Executive Director (the officer of the Reserve Bank nominated by the Central Board).

Dr Viral V Acharya, deputy governor in charge of monetary policy.

Shaktikanta Das, RBI governor.

Outlook

The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 per cent on a durable basis.

Outcome of MPC

On Repo Rate

Reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.5 percent to 6.25 percent with immediate effect.

Reverse Repo Rate

The reverse repo rate under the LAF stands adjusted to 6.0 percent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.5 percent.

Policy Stance

The MPC also decided to change the monetary policy stance from calibrated tightening to neutral.

Monetary Policy Stance of members

The decision was unanimous.

Voted In Favour Of A Rate Cut

Dr Ravindra H Dholakia, Dr Pami Dua, Dr Michael Debabrata Patra and Shaktikanta Das.

Voted To Keep The Policy Rate Unchanged

Dr Chetan Ghate and Dr Viral V Acharya.

Dr Chetan Ghate's Take

Maintaining the status quo on the rates would be consistent with sustainable growth in the economy and achieving the inflation target over the medium-term.

Dr Pami Dua's Take

In light of the benign inflation outlook and a moderation in inflation expectations, as well as the likely headwinds due to the global growth slowdown, I vote for decreasing the policy repo rate by 25 basis points.

Dr Ravindra H Dholakia's Take

In my view, this is the time to act decisively by changing the stance from calibrated tightening to neutral and cutting the policy rate by 25 bps, to begin with. The future rate actions may be data-driven particularly with respect to the target of 4 percent headline inflation sustaining over time and the direction and magnitude of the output gap.

Dr Michael Debabrata Patra's Take

It is prudent to preserve sufficient policy space to insulate the economy from adverse external shocks and boost the domestic economy in an opportune manner rather than deplete it in haste.

Dr Viral V Acharya's Take

Finally, recall that I did vote for a rate cut in August 2017; at that point of time, all components of inflation had experienced downward trends, upside risks to inflation, had reduced, and growth was weaker. That constellation of parameters gave me greater comfort to cut the policy rate than at the present juncture. Should a similar situation evolve in the next two months, I would have greater clarity for future policy action.

Shaktikanta Das' Take

Growth impulses have weakened and there is a need to spur private investment and strengthen private consumption, especially in the wake of slowing global growth. Inflation readings since the December 2018 policy have shown a sharp decline. The overall food outlook remains benign and the headline inflation one-year ahead is projected to remain below the target level of four percent.

Next Meeting of MPC

April 2 to 4, 2019.

First Published:Feb 21, 2019 5:59 PM IST