Monetary Policy Committee Needs To Be Watchful On Inflation: Minutes

Earlier in the month, the RBI kept interest rates at record lows and promised to keep its policy accommodative for as long as necessary.

The monetary policy committee must be watchful of inflation expectations getting entrenched if prices remain elevated for too long, as it could undermine its hard-earned credibility in efficient inflation targeting, MPC member Jayant Varma wrote in the June meeting minutes published on Friday. "To maintain and enhance this credibility, the MPC needs to remain data driven so that it can respond rapidly and adequately to any unforeseen shocks that may arise in future," he said. Earlier in the month, the Reserve Bank of India (RBI) kept interest rates at record lows and promised to keep its policy accommodative for as long as necessary and said current inflation pressures would likely be transient. Data released after the policy review showed India's annual retail inflation rate rose 6.30 per cent year-on-year in May, breaching the RBI's upper tolerance band of 6% and up from 4.29% in April and sharply above analysts' estimate of 5.30 per cent.