The Reserve Bank of India (RBI) will continue its policy support to push forward a durable, broad-based and self-sustaining rebound at a time when uncertainty seems to be emerging as the only certainty, its Governor Shaktikanta Das said, as per the minutes of monetary policy meeting released on Wednesday.

“In this scenario, it would be prudent to watch out for growth signals becoming well entrenched while remaining vigilant on inflation dynamics,” Das expressed.

On 8 December, the six-member Monetary Policy Committee (MPC) unanimously voted for keeping the policy rates unchanged for the ninth consecutive time.

At the meeting, the RBI Governor said the Omicron variant of the coronavirus has exposed the global economy to risks as countries are scrambling for restrictions.

While voting in favour of continuing with the accommodative stance, Das said these developments certainly have two major takeaways for central bankers. "First, uncertainty is emerging as the only certainty with which central bankers will have to deal with in the period ahead. Second, since monetary policy is at an inflection point, the journey of monetary policy which is hardly smooth in the best of times is going to get more challenging.”

Even as the prospects for economic activity are improving in India, there is still a slack with key drivers like private consumption remaining well below their pre-pandemic levels, he added.

"Given these uncertainties, continued policy support is warranted for a durable, broad-based and self-sustaining rebound, especially to nurture revival in sectors which are lagging and to safeguard those which are exposed to the evolving headwinds," the Governor said.

At the meeting, RBI deputy governor Michael Patra said suddenly the global outlook has darkened. "As countries race to contain Omicron with travel restraints and new quarantine and social distancing measures, the global recovery and the inflation outlook are at risk again," he added.

RBI executive director Mridul Saggar said appropriate liquidity levels are key to monetary adjustment at this stage when the recovery is nascent. It is also important to address unintended effects reflected in asset prices inflation, income inequalities and future risks of macro-financial imbalances, he added.

External member Jayanth R Varma, who was the only member to vote against  continuing with the accommodative stance, said there is increasing evidence of inflation becoming persistent in the upper region of the tolerance band. He was also of the view that the MPC needs to remain data driven so that it can respond rapidly and adequately to any unforeseen shocks that may arise in future.

Varma wanted to raise the reverse repo rate from its current level of 3.35%. Raising effective money market rates quickly towards 4% would demonstrate the MPC’s commitment to the inflation target, he said.