Policy to stay loose despite first signs of MPC dissent

The minutes of the Reserve Bank’s August policy meeting show the first signs of dissent as MPC member Jayanth Varma argued that a hike in the reverse repo rate and a change in policy stance would be prudent to show that the committee remains committed to reining in inflation. But most members – including Governor Shaktikanta Das – appear more concerned about the downside risks to the economic recovery. That supports our view that policy will remain loose for a long while yet.