Mumbai: Members of the Reserve Bank’s rate-setting panel voted for the status quo on interest rates earlier this month, citing uncertainties posed by the West Asia crisis and its impact on inflation, according to minutes of the Monetary Policy Committee (MPC) released on Wednesday.
RBI Governor Sanjay Malhotra opined that the West Asia conflict poses challenges to the Indian economy through a number of channels –exports, supply of critical commodities, elevated energy and other commodity prices, remittances, uncertainty, and subdued global demand.
Overall, geopolitical uncertainties have intensified with the conflict widening its spread over the last month, he said.
As a result, supply chain disruptions, which may take longer to subside fully and restore the logistics network, pose downside risks to the growth and upside risks to inflation.
“As for monetary policy, this represents a supply shock. The underlying inflation pressures, minus the shock, are contained.
“If the conflict remains unresolved for a long duration, it can make the task of central banks arduous in their endeavour to rein in inflation expectations while minimising growth sacrifice,” the minutes quoted Malhotra as saying.
Following the three-day meeting, the MPC kept its key policy rate unchanged on April 8, adopting a cautious wait-and-watch stance as policymakers assessed the fallout from the six-week Iran conflict on energy supplies, inflation and growth.
The central bank’s six-member MPC voted unanimously to keep the benchmark repurchase rate at 5.25 per cent, flagging heightened uncertainty after the West Asia conflict drove crude prices sharply higher, a weak rupee and disrupted trade flows.
The RBI’s policy stance was retained at neutral.
