RBI To Hold Additional Monetary Policy Meeting On November 3 As Inflation Stays Above Target

Section 45ZN of the Act deals with failure to maintain the inflation target if the inflation remained above the upper tolerance limit of 6 per cent for nine straight months or three quarters.

Since May, repo rate has been hiked by 190 bps even as inflation stayed stubbornly higher, over 6 per cent — the upper tolerance limit of the RBI.

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The Reserve Bank of India (RBI) will hold an additional meeting of Monetary Policy Committee (MPC) on November 3, 2022, the central bank said in a statement on Thursday.

The RBI MPC hiked the policy repo rate by 50 basis points (bps) to 5.9 per cent in the last policy review, announced on September 30. Since May, repo rate has been hiked by 190 bps even as inflation stayed stubbornly higher, over 6 per cent — the upper tolerance limit of the RBI. (100 bps = 1 percentage points).

“Under the provisions of Section 45ZN of the Reserve Bank of India (RBI) Act 1934, read along with the Gazette notifications S.O.2215(E) dated June 27, 2016 and S.O.1422(E) dated March 31, 2021 and the Regulation 7 of the RBI Monetary Policy Committee (MPC) and Monetary Policy Process Regulation, 2016, an additional meeting of the MPC is being scheduled on November 3, 2022,” the RBI said in a release.

Section 45ZN of the Act deals with failure to maintain the inflation target if the inflation remained above the upper tolerance limit of 6 per cent for nine straight months or three quarters.

Further, as per Regulation 7 of the aforementioned regulation, the MPC’s secretary 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 under the provisions of Section 45ZN of the Act”.

India’s consumer price index-based (CPI) inflation was at 7.41 per cent in September 2022, according to the data revealed on Octover 12. The data officially marks the MPC’s failure to keep inflation within the mandated 2-6 per cent target range for three successive quarters.

It is the first time that inflation has remained out of the mandated range for three successive quarters since the six-member panel started to decide the policy repo rate in October 2016.

The Centre in August 2016 notified that the target for CPI inflation was 4 per cent, with the upper tolerance limit set at 6 per cent and the lower limit set at 2 per cent for five years. On March 31, 2021, the government extended the same till 2026.