What is the Monetary Policy Committee?

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Why in the News?:

Since May, the board has now increased the key rate by 225 bps in FY23.
- A 100 basis points equal one percentage point.
Retail price inflation in India reduced to 6.77 percent YoY in October 2022 from a five-month high of 7.41 percent in September, 2022.
However, the fact that it continued to be above the central bank’s acceptable limit of 2 to 6 percent for a tenth consecutive period prompted RBI to raise the repo rate for the fifth time.
Inflation is expected to be 6.7% this year, with CPI inflation for the first quarter of 2023-24 projected at 5% and the second quarter at 5.4% on the assumption of a normal monsoon.
The central bank’s key committee also marginally lowered the GDP projection to 8% for 2022-23, with the third quarter registering 4.4% growth.
The rupee has appreciated by 3.2% in real terms even as several other currencies have dropped.

Monetary Policy Committee

The Monetary Policy Committee of India is responsible for fixing the policy interest rate, to achieve the objectives of monetary policy.

Composition:

Three officials of the Reserve Bank of India, with Governor of RBI as Chairperson, ex officio
Three external members appointed by the Government of India
The external members hold office for a period of four years.
Decisions of the MPC are taken on the basis of majority, with Governor having the casting vote in case of a tie.
The MPC meets least 4 times a year and it publishes its decisions after each such meeting.

Q1) What is CPI?

The Consumer Price Index (CPI) is a measure of the average change overtime in the prices paid by urban consumers for a market basket of consumer goods and services.