It appeared after the Reserve Bank of India's last monetary policy statement a fortnight ago that the bar for further rate hikes was too high and that there would be a prolonged pause in rate hikes.

While the minutes of the Monetary Policy Committee's meeting released on Apr 20 do not fundamentally alter those post-policy expectations, they certainly knock the conviction with which the markets surmised an end to the tightening cycle.

The RBI members on the Committee remained as hawkish and indicated rate hikes are not ruled out as the job was not done yet.

Another surprise was the voting patterns, which, too, gave away members' hawkishness.

External member Jayant Verma, who voted against the stance of the policy to remain "focused on withdrawal of accommodation" since the September meeting, opposed it this time for reasons of semantics.

The minutes showed he did not "dissent" against the stance, but had "reservations" against it despite the explanations offered by his colleagues on the Committee.

"I cannot put my name to a stance that I do not even understand," Verma was minuted as saying.

The other five members of the committee had voted for retaining the stance, which indicates what the Committee might do next.

Another external member Ashima Goyal, in fact, changed her position from February when she had voted against the same stance or, in other words, dissented.

This time she voted for the seemingly hawkish stance.

Hawkish Pause

To recapitulate, The Reserve Bank of India's Monetary Policy Committee on Apr 6, 2023, left the repo rate unchanged for the first time since it began raising the rate in May 2022.

The MPC's decision had surprised the markets, which priced in a 25 basis point hike as a safe bet after the US Federal Reserve had raised the rate by 25 basis points on Mar 22 to 4.75-5.00% despite signs of stress in US banks.

The minutes of the meeting showed RBI members on the committee took pains to explain that pause in April was just a breather to assess the impact of the cumulative 250 basis point increase in the repo rate effected in the last one year. It was a tactical, not a strategic, move.

As he said at the press conference on Apr 6, Governor Shaktikanta Das wrote in the minutes that the pause in April was not to be taken as a pivot to rate cuts.

"This is a tactical pause and not a pivot or a change in policy direction," Das wrote in the minutes.

"Our fight against inflation is far from over and we have to continue with our efforts to bring down inflation closer to the target over the medium term."

RBI's Executive Director in charge of monetary policy, Rajiv Ranjan, wrote that the decision not to raise the repo rate was a 'wait and watch' pause.

"It is neither a 'premature' pause nor a 'permanent' one," he said.

According to Ranjan, the pause is not permanent because a durable fall in inflation towards the target of 4% is still distant.

Deputy Governor Michael Patra appeared to be the most hawkish.

He advocated a restrictive stance if the risks to RBI's inflation projections materialize. RBI expects inflation to ease to 5.2% in the last quarter of 2023-24 from 6.2% in the last quarter of 2022-23.

"The stance of policy has to remain disinflationary and unwavering in its resolve to align inflation with the target of 4 per cent," said Patra as per the minutes.

"It is prudent to anticipate future shocks to the inflation trajectory," he cautioned.

Both Verma and Goyal agreed that the Committee cannot rule out further rate hikes.

"It is necessary to emphasize that this (pause in April) may not be the end of the rate hikes," said Goyal. And, Verma said, "It would be premature to declare an end to this tightening cycle."

The minutes show that the Committee is not entirely a divided house. Should inflationary pressures persist, the MPC will resume rate hikes.

No member is asking for lower rates at any time in the near future. The markets will now price in that while the bar for more rate hikes is high, it is not that high.