Two members of the monetary policy committee (MPC) cautioned against keeping the policy repo rate at elevated levels as it could hurt the economy, even as others felt that the war against inflation is not over, minutes of the meeting of the interest rate setting body showed on Thursday.

The MPC had met for three days beginning June 6 during which they decided to hold the repo rate at 6.50 per cent.

Following the meeting, economists had felt that the central bank will be on an extended pause that could last till the end of this calendar year and one can expect a cut in 2024. This came after comments from the RBI that it is resolutely focussed on attaining the 4 per cent target to achieve sustainable growth.

“Based on the forecast inflation for 5.1 per cent for 2023-24, the real repo rate is now almost 1.50 per cent (the real short term rate could well be above that level since in recent weeks, many money market rates have often drifted towards the marginal standing facility rate of 6.75 per cent)... monetary policy is now dangerously close to levels at which it can inflict significant damage to the economy,’’ Varma said.

He added that after two successive meetings during which the repo rate was left untouched, the RBI’s stance of withdrawal of accommodation appeared more “vestigial than a serious statement of intent’’.

The other external member Ashima Goyal said: Research suggests that the inflation targeting regime has contributed to reducing inflation expectations. Commitment to such a regime only involves aligning the nominal repo rate with expected inflation. Such action is adequate to bring inflation to target as the effect of shocks dies down. It does not require the nominal repo to be kept higher for longer,” she noted.

However, RBI deputy governor Michael Patra said that two pauses from the MPC should not be interpreted as the interest rate cycle having peaked, but as a period of careful evaluation of a decision on the extent of additional policy tightening, if needed.