FPJ News Service mumbai

In a world order dominated by continuing geopolitical tensions and elevated trade and policy uncertainties, monetary policy, as the guardian of macroeconomic and financial stability, is traversing through a challenging time, RBI Governor Sanjay Malhotra said.

The repo rate cut was an appropriate monetary policy response, citing movement of inflation towards the central bank’s 4% target. The MPC at its meeting held from February 5 to 7 had effected the rate cut after a gap of five years. It had voted for a 25 basis points reduction in the short-term lending rate (repo) to 6.25%.

In the MPC meeting minutes released on Friday, Malhotra said: “It has to balance a multitude of pressure points and continuously evolving policy trade-offs. Stronger policy frameworks and robust macro fundamentals remain the key to resilience and fostering overall macroeconomic stability.”

Domestically too, there is a need to preserve the high growth momentum, while maintaining price stability, necessitating monetary policy to use various policy instruments to maintain the inflation-growth balance, he said. The next meeting of the MPC is scheduled during April 7 to 9, 2025.

Headline inflation, after moving above the upper tolerance band in October, has moderated in November and December. Going forward, food inflation pressures are likely to see significant easing on robust kharif harvest arrivals, winter season correction of vegetables prices and a promising rabi crop outlook. The food inflation outlook is turning decisively positive.

Moreover, the budget proposals on agriculture and the commitment to fiscal consolidation, among others, are positive for price stability and would help to anchor inflation expectations over the medium term. These would provide greater impetus to disinflation of headline CPI and its eventual alignment with the target rate in FY 2025-26.