Global commitments hold back RBI from scheduling mid-month MPC meetings

The Reserve Bank of India (RBI) considered moving the bi-monthly Monetary Policy Committee (MPC) meetings to the middle of a given month in a bid to factor in more updated macroeconomic numbers such as inflation and factory output data, but global commitments held it back from moving in that direction. At present, the MPC typically meets in the first week of a particular month when it is able to mostly take into account dated official macroeconomic numbers.

RBI Governor Sanjay Malhotra said that he considered making this shift in the monetary policy calendar after taking charge in December, but the RBI’s commitments did not allow the space to make such a change. “We gave it a thought. This is the same question I asked when I joined the RBI — can we do it more in the middle of the month rather than do it little early in the month because one gets more data. There are reasons because there are other meetings, which happen during the middle of the month, because of which we can’t do it in the middle of the month” Some of the commitments of the RBI include international meetings such as those with the World Bank and the IMF, he said. “Because of that we are unable to shift it in the middle (of the month). So, enough thought has gone into it and that’s why they have decided that they would be doing these meetings early in the month rather than later in the month. So that’s where it stands today,” Malhotra said.

Among the key indicators that the RBI takes into account, the retail inflation data for a month is released by the Ministry of the Statistics and Programme Implementation (MoSPI) on the 12th of the next month, while the factory output data based on the Index of Industrial Production is released with a lag of two months on the same date.

The latest MPC meeting held last week came ahead of the February 12 release date for retail inflation data for January. While the MPC’s decision to cut the repo rate by 25 basis points after a five-year gap took into account the December inflation print, which had eased to 5.22 per cent, the central bank possibly had access to only preliminary estimates for January. Inflation is expected to soften further in January, data for which will be released next week.