- Upside risks to inflation and downside risks to growth had intensified
- The economy had already been weakening, held back by persistent uncertainty
- Such weakness could persist well beyond the end of the conflict
- The energy price shock and associated supply disruption posed a dilemma for monetary policy
- So far, there was little evidence that the increase in energy prices was generating second-round effects
- However, the probability of such effects would increase as the duration of the conflict increased
- On the consumer side too, it was still too early for second-round effects to be visible
- The current situation of a classical negative supply shock was different from the situation in 2022
- Maintaining price stability might necessitate tighter monetary policy to keep inflation expectations in check
- Policymakers emphasised that they could afford to gather further information before deciding to act
- By June, more information on the impact of the energy shock would be available
- There is also likely to be more clarity on the duration of the conflict by then
- A number of members noted that the decision was a close call and that they would not have opposed raising rates at the current meeting had this been on the table
- Increasing interest rates at the current meeting would have sent an even stronger signal of determination
- The option value of waiting to raise policy rates had decreased since the last meeting
- In spite of all the concerns, all members were willing to rally behind the decision to keep policy rates unchanged
- There was no acute urgency for a rate hike at the current meeting
- That so long as the communication stressed on the firm commitment to setting monetary policy to ensure that inflation stabilised at the target in the medium-term
- Full account
More to come..
This article was written by Justin Low at investinglive.com.
