India: RBI minutes strike a more hawkish note – Nomura

The minutes of the 7 February policy meeting of RBI suggest that although the majority of monetary policy committee (MPC) members were concerned about rising inflation risks, they voted for the status quo because the recovery is still in a nascent stage and needs to be nurtured, explains the research team at Nomura.

Key Quotes

“Governor Patel stated that inflation is becoming generalised, Deputy Governor Acharya warned that the RBI’s policy stance may need to change once growth strengthens, while hawkish member Patra sees a series of hikes.”

“Does this change your economic view? Not yet, although risks are biased towards tightening once the growth recovery strengthens. In the near term, we expect inflation to moderate and growth to disappoint the RBI and hence see another 5-1 vote for the status quo on 5 April. However, with growth-inflation data likely to be higher after April, we believe there is a risk of more hawkish rhetoric at meetings in June and beyond, including a change in policy stance. We expect policy rates to remain unchanged in 2018, but risks to food price inflation have risen owing to the recent tilt in government policies.”