New Delhi, Aug 21 : Benign inflation, tepid credit growth and slowdown in demand are some of the major themes to come out of the minutes of the MPC meeting released by RBI.
RBI Governor Shaktikanta Das said that the weakening of domestic growth impulses and unsettled global macroeconomic environment saw the need to bolster dwindling domestic demand and support investment activity.
RBI on August 7 had reduced the benchmark lending rate by 35 basis points to 5.40 percent amid concerns over slowdown in economy. Before this, the RBI had reduced the rate thrice, each time by 25 basis points.
Two of Das’s RBI colleagues and an independent member in the rate-setting MPC had also favoured a 35-basis point reduction, against the normal practice of 25 or 50 basis points change, in the third bi-monthly monetary policy of 2019-20.
The other two members, both independent, in the six-member MPC had voted for a 25-basis point cut.
Das said that headline inflation is projected to remain within the target over the next one-year horizon, and that supporting domestic growth by further reducing interest rates needs to be given the utmost priority, and that the economy needs a larger push.
Chetan Ghate took into account for the previous downward revisions in MPC’s inflation and growth projections, the committee’s change in stance in June to accommodative from neutral, and the substantial flattening and shifting down of the yield curve as reasons for voting in favour of a rate cut.
Ghate also accounted for the tepid growth in the global economy, and the variety of growth indicators have weakened further domestically.
MPC member Pami Dua also accounted for the ongoing trade tensions between the US and China, the monetary policy stance of major central banks recently being more dovish, and also voted for a rate cut of 25 bps to enhance consumer confidence and improve investor sentiment.
