The Reserve Bank of India on Thursday announced an extra meeting of the Monetary Policy Committee (MPC) on November 3, in addition to the scheduled bi-monthly meetings.
As per the meeting schedule of the MPC for FY23, the committee’s next meeting was to be held from December 5-7. In its last three-day meeting, which ended on September 30, the RBI had hiked the key policy repo rate by 50 bps to 5.9 per cent.
The additional meeting has been scheduled under the provisions of Section 45ZN of the Reserve Bank of India (RBI) Act 1934, which states that if RBI fails to meet the inflation target, it will need to submit a report to the government explaining the reasons for the failure, remedial actions proposed to be taken, and an estimate of the time-period within which the target may be achieved.
The RBI also cited Regulation 7 of the RBI MPC and Monetary Policy Process Regulation, 2016, which states that the MPC must schedule a separate meeting as part of the normal policy process “to discuss and draft the report” to be sent to the central government within one month from breaching the inflation target.
As per the flexible inflation targetting framework of the MPC, the RBI failed the inflation targetting mandate after the Consumer Price Index (CPI)-based inflation print came outside the 2-6 per cent tolerance band for three consecutive quarters. The CPI print has now also been above the RBI’s medium-term target of 4 per cent for 36 consecutive months, or three years.
CPI inflation averaged at 6.3 per cent in January-March, 7.3 per cent in April-June, and 7 per cent in July-September. The headline inflation rose to 7.4 per cent in September from 7.0 per cent in August.
In a conference following the MPC meeting on September 30, Governor Shaktikanta Das had said that the MPC will meet to discuss the RBI’s report to the government.
“What we will write, I will not say. But as I have said earlier, we are expecting the inflation to come down close to the target over a two-year cycle, that was our expectation earlier and even now,” Das had said, adding that it will be up to the government to make the report public as it is “privileged communication”.
The RBI’s most recent forecast pegs CPI inflation at 6.7 per cent in FY23 before easing to 5.2 per cent in FY24.