MPC meeting minutes: Dholakia argued for at least 50-bp rate cut


Ravindra H Dholakia’s proposition, that plunging inflation called for a drastic rate cut of 50 basis points (bps) or more, clearly did not find other buyers in the six-member Monetary Policy Committee (MPC) that met on June 6 and 7.

As the statements of the minutes show, they favoured a wait-and-watch. The MPC voted five against one to keep the Reserve Bank of India’s (RBI’s) repo rate (at which it lends to banks) unchanged at 6.25 per cent, though retail inflation had fallen below three per cent in April.

From the minutes of the two-day meet, economists say, the chance of a rate cut at the next review, in August, look slim.

The chances of a 50-bps cut in October is more than a 25-bps cut in August,” said Gaurav Kapur, chief economist at IndusInd Bank.

One has to see through the noise. Given the nature of the concerns by various MPC members, it doesn’t look like they will all be convinced so soon that a rate cut should be done because food prices are on a downward trajectory.”

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