Hardening domestic fuel prices are likely to weigh on the Reserve Bank’s rate setting panel, Monetary Policy Committee (MPC), at its 3-day meet from June 4. This is the first time that the MPC will meet for three days due to “administrative exigencies”.

In the normal course, it meets every two months for two-days before making public its monetary policy stance. “The MPC will meet on June 4-6, 2018 for the Second Bi-monthly Monetary Policy Statement for 2018-19. The resolution of the MPC will be placed on the website at 2.30 pm on June 6, 2018,” the Reserve Bank of India said in a statement today.

The MPC was originally scheduled to meet on June 5, but the meeting has been advanced by a day. The monetary policy review will take into account the retail inflation which rose to a 4-month high of 3.18 per cent in April mainly on account of increasing prices of petrol and diesel.

Impact on fuel prices

RBI mainly factors in retail inflation, based on the Consumer Price Index (CPI), while deciding the key interest rate. The domestic retail petrol and diesel prices are at all time high on account of rise in crude oil prices in international market. High petrol and diesel prices can further fuel inflationary expectations.

At the April 4-5 MPC meeting, RBI Deputy Governor and member Viral Acharya had cited revival in investment activity and an improvement in capacity utilisation for his switch from a neutral stance to shift “decisively to vote for a beginning of withdrawal of accommodation in the next monetary policy meeting in June.”

A majority of the six-member panel had flagged upside risks to inflation as it kept the benchmark repurchase rate unchanged at 6 per cent.

The MPC was set up by amending the Reserve Bank of India Act, 1934, through the Finance Act 2016. The first meeting of the MPC was held in October 2016. Prior to setting up of the MPC, the RBI Governor used to decide the interest rate.

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