Inflation Trends and Policy Rate Changes Under Outgoing MPC During 25 Monetary Policy Decisions
Under the outgoing Monetary Policy Committee, India's headline inflation was managed from 7.61% in October 2020 to 3.65% in August 2024, peaking at 7.79% in April 2022. The MPC raised the repo rate by 250 basis points to 6.5?tween May 2022 and February 2023, ensuring inflation control while supporting economic growth. The newly reconstituted MPC inherits a stable policy framework with room for adjustments.
Inflation Trends and Policy Rate Changes Under Outgoing MPC During 25 Monetary Policy Decisions
The outgoing Monetary Policy Committee (MPC), which oversaw 25 monetary policy decisions from October 2020 to September 2024, successfully managed inflation and repo rate adjustments during a period of global and domestic economic turbulence. With the newly reconstituted MPC including three new external members—Ram Singh, Saugata Bhattacharya, and Nagesh Kumar—this report reviews the inflation trends and policy rates under the outgoing panel consisting of Jayanth Varma, Ashima Goyal, and Shashank Bhide.
Inflation Trends During MPC Tenure
When the outgoing MPC assumed office in October 2020, India's headline inflation stood at 7.61%, reflecting high price pressures. Throughout its tenure, inflation peaked at 7.79% in April 2022 due to external factors, including supply chain disruptions and rising commodity prices. As the MPC concludes its term, inflation has eased significantly, with the latest print for August 2024 showing a decline to 3.65%, marking a substantial decrease from the initial levels.
Repo Rate Adjustments
The repo rate, a key tool for managing inflation and stimulating economic activity, was at 4% when the MPC was reconstituted in October 2020. The panel maintained this accommodative stance for the initial period, prioritizing economic recovery from the pandemic. However, as inflationary pressures built up in 2022, the MPC raised the repo rate by a cumulative 250 basis points from May 2022 to February 2023, bringing it to 6.5%. Since then, the committee has maintained a steady repo rate, opting for stability to support growth while keeping inflation within control.
Impact and Conclusion
The outgoing MPC effectively navigated the Indian economy through the post-pandemic recovery phase and external economic shocks. Its policies balanced inflation control with growth, stabilizing inflation while managing a series of interest rate hikes. As the new MPC takes over, it inherits a relatively stable inflation outlook and a repo rate of 6.5%, with expectations for further policy adjustments depending on economic conditions.
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