MPC changes stance from withdrawal of accommodation to 'neutral' to monitor progress on disinflation which is still incomplete, Says RBI Governor

The RBIs monetary policy committee with new external members noted that the domestic growth outlook remains resilient supported by domestic drivers private consumption and investment. This provides headroom for monetary policy to focus on the goal of attaining a durable alignment of inflation with the target. The MPC reiterates that enduring price stability strengthens the foundations of a sustained period of high growth. After a transient spike in the near term, headline inflation is expected to moderate as projected above. With better prospects for both kharif and rabi crops and ample buffer stocks of foodgrains, there is now greater confidence on the disinflation path later in the financial year. Keeping in view the prevailing and expected inflation-growth dynamics, which are well balanced, the MPC decided to change the monetary policy stance from withdrawal of accommodation to neutral and remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth. The change in stance provides flexibility to the MPC while enabling it to monitor the progress on disinflation which is still incomplete. Risks stem from uncertainties relating to heightened global geo-political risks, financial market volatility, adverse weather events and the recent uptick in global food and metal prices. Hence, the MPC has to remain vigilant of the evolving inflation outlook. Accordingly, the MPC decided to keep the policy repo rate unchanged at 6.50 per cent in this meeting.

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