India's monetary policy committee struck a balanced note on its rate stance going forward and cited rising inflation pressure due to high oil prices as the key reason for raising interest rates in the June meeting, according to minutes of the meeting released by the Reserve Bank of India on Wednesday.
The MPC members raised concerns over rising household inflationary expectations which along with robust growth momentum could add to price pressure going forward.
However, the six members who had unanimously voted for a rate hike at the June 6 meeting preferred to wait for more clarity on the inflationary impact of a government proposal to increase the minimum purchase price of foodgrains, along with the direction of oil prices. That prompted them to hold their stance at "neutral" instead of moving to "tight".
"It will allow the MPC to determine in a flexible manner what further monetary policy response is warranted based on an ongoing assessment of the inflatlation situation, inflation expectations and growth prints in the coming months," RBI Deputy Governor Viral Acharya wrote in the minutes, referring to the neutral stance.
India's headline consumer inflation rose to a four-month high of 4.87 per cent on-year in May, with core inflation that excludes food and fuel rising to around 6.20 per cent reflecting strong demand pressure.
India posted its best growth in nearly two years at 7.7 per cent in January-March quarter.
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