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MPC warns of upside risks to inflation

  • In the first bi-monthly monetary policy review of 2017- 18, the RBI decided to keep the policy interest rate unchanged at 6.25%.
  • While all the six members of the Monetary Policy Committee of the Reserve Bank of India (RBI), that sets interest rate, voted in favour of a status quo,
  • One member discussed the possibility of increasing the rate to achieve the 4% retail inflation target over the medium-term.
  • According to him, a pre-emptive 25 basis points increase in the policy rate now would point MPC better at the target of 4% to which the Committee has committed explicitly.
  • It will also obviate the need for back-loaded policy action later when inflation is unacceptably high and entrenched.
  • Inflation outlook has many other risks.

Note4Students: Revise about MPC, its struc- ture, mandate, way of functioning etc. Also, good time to back to Economics book and read about Repo, Reverse Repo and other key policy rates and their effects on inflation and overall economy.

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