New Delhi, Dec 19 (IANS): The Reserve Bank's Monetary Policy Committee (MPC) members, in their meeting in December, expressed the need for continuation of accommodative stand.

The minutes of the MPC meeting revealed that the majority of members cited the current inflation dynamics as a manifestation of supply side shock.

In the meeting, MPC member Ashima Goyal said, "Headline CPI inflation has also exceeded expectations. But analysis suggests it is due to multiple supply shocks. Covid-19 and the lockdown was itself a massive supply shock, so much so that there was a break in the inflation series. The headline series being targeted now starts from Q2 (July-September), after the break in the lockdown months when it was not possible to even measure inflation."

"To continue the delicate balance between lowering inflation, anchoring inflation expectations yet strengthening the growth recovery, I vote to maintain the status quo in policy stance and rates."

Another MPC member Mridul K. Saggar said, "Monetary policy under the inflation targeting strategy requires policy to be informed by economic analysis. Liquidity, credit and monetary aggregates will need to be closely monitored in this context with an eye on macro-financial stability that can be enervated when short-term borrowing costs fall below the operational policy rate. If this results in persistence of negative real rates for too long, it can adversely affect savings, lend support to mispricing of financial asset prices and encourage excessive leveraging."

"As such, other policies outside the flexible inflation targeting framework, such as macroprudential and strengthening the instruments of sterilisation in view of surge in capital inflows in recent months may be needed to mitigate these risks."

On his part, RBI Deputy Governor Michael Debabrata Patra said, "Economic activity is recovering but hesitantly and unevenly. This warrant continuing policy support till it is set on a firm trajectory of self-sustaining expansion."

"At the same time, the confluence of forces determining inflation outcomes and their likely persistence imparts downside risks to growth, unless contained early. Amidst this high uncertainty, the MPC's dilemma around its window of accommodation has become more acute than at the time of its last meeting."

In addition, RBI Governor Shaktikanta Das said, "Overall, the persistence of inflation at elevated levels constrains monetary policy at the current juncture. At the same time, though recovery is underway, there is still continuous need to nurture and support growth to make it broad based and durable. A premature roll back of the monetary and liquidity policies of RBI would be detrimental to the nascent recovery and growth. The overall situation needs to be monitored carefully, both in the sides of growth and inflation."

"On balance, therefore, I vote to keep the policy rate unchanged and continue with the accommodative stance as long as necessary - at least during the current financial year and into the next financial year - to revive growth on a durable basis and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward. We need to monitor closely all threats to price stability and possible spill overs to broader macroeconomic and financial stability," he added.

Consequently, to curb the rise in inflation, and stabilise the general economic environment, the Reserve Bank on December 4 retained its key short-term lending rates, but maintained its growth-oriented accommodative stance.

The MPC of the central bank maintained the repo rate -- or short-term lending rate for commercial banks, at 4 per cent.

Likewise, the reverse repo rate stands unchanged at 3.35 per cent, and the marginal standing facility (MSF) rate and the 'Bank Rate' at 4.25 per cent.