Robust kharif harvest arrivals, correction in vegetable prices in winter season and good prospects for rabi crop are likely to ease pressure on food inflation going ahead, RBI Governor Sanjay Malhotra said in the minutes of the Monetary Policy Committee (MPC) meeting held during February 5-7.The RBI Governor, who voted for a 25 basis points (bps) cut in the repo rate, wrote in the minutes that given the macroeconomic outlook when inflation is expected to align with the target, and recognising that monetary policy is forward-looking, a lower policy rate would be more appropriate at the current juncture.“Going forward, food inflation pressures are likely to see significant easing on robust kharif harvest arrivals, winter season correction of vegetables prices and a promising rabi crop outlook. The food inflation outlook is turning decisively positive,” Malhotra wrote in the minutes. These were his first MPC minutes after taking charge as the RBI governor in December last year.In January, the consumer price index (CPI) of inflation fell to a five-month low of 4.31 per cent from 5.22 per cent in December.The Budget proposals on agriculture and the commitment to fiscal consolidation were positive for price stability and would help anchor inflation expectations over the medium term. These would provide greater impetus to disinflation of headline CPI inflation and its eventual alignment with the target rate in FY 2025-26, Malhotra said.In the monetary policy, all MPC members unanimously decided to reduce the repo rate — the key policy rate — by 25 bps to 6.25 per cent, and retain the policy stance as neutral.“Monetary policy easing, coupled with good agricultural sector growth and various growth supportive measures in the Union Budget, would boost household consumption, investment in housing, capital expenditure, etc thereby strengthening the pick-up in aggregate demand,” the Reserve Bank of India Governor said. At the same time, rising uncertainties on global financial markets and trade policy front, coupled with the continuing challenges from adverse weather events pose risk to the inflation and growth outlook.Story continues below this ad“We need to be watchful of how these forces play out. Hence, I vote to continue with the neutral stance of monetary policy. This will provide the flexibility to respond to the evolving macroeconomic environment,” the Governor said.RBI Deputy Governor Rajeshwar Rao said that the inflation outlook is turning out to be more benign. “A correction in food inflation is necessary for a durable softening of headline inflation. Reassuringly, recent data is signalling a favourable rabi season,” he said.This, along with the kharif market arrivals and the ongoing winter season correction in vegetables prices, should lead to a significant easing of food inflation pressures in the coming months, Rao wrote in the minutes. Core inflation (inflation in CPI excluding food and fuel) pressures are also expected to remain muted.“At the current juncture, with a further alignment of headline inflation towards the 4 per cent target, there is greater space to address concerns regarding growth by way of reduction in the policy repo rate,” Rao said.Story continues below this adOne of the external MPC members, Saugata Bhattacharya, voted for a 25 bps cut in the repo rate, which he believed was an appropriate policy response. “I am now cautiously optimistic about the downward trajectory of inflation. I believe that, at this point, the required policy response on the inflation-growth trade-off — even factoring in significant margins of error from emerging risks — seems skewed in favour of the latter,” he said.“Given the forecast inflation trajectory, the policy repo rate might soon, if not even as of now, become excessively restrictive, thereby increasing the risk of cumulatively damaging growth impulses,” Bhattacharya added.Another external member of MPC Ram Singh said given the demand boost from Budget 2025, a rate cut powered by a commensurate increase in liquidity will decrease the risk premium demanded by investors, thereby boosting private investment to support growth.MPC member and Reserve Bank of India’s Executive Director Rajiv Ranjan said, “a policy rate cut in February 2025 is the most rational and appropriate next step as we now have greater confidence on the disinflation path.”Story continues below this adExternal MPC member Nagesh Kumar said in the Union Budget 2025-26, the fiscal policy has done its bit by sustaining the public investment (capex) and through income tax concessions to the middle-income groups to enhance disposable incomes to augment consumption.“It is now monetary policy’s turn to support economic growth through a rate cut. A rate cut could help to spur demand for investment in housing and durable consumption goods and could support private investment by lowering the cost of capital,” he said.