India’s inflation target structure remains unchanged for the next five years

The government has maintained the central bank’s inflation target structure as it has remained unchanged for a period of five years from April 1, 2021. “The inflation target for the 2021-22201 period has been kept at the same level as in the previous five years,” Tarun Bajaj, economic affairs secretary, told reporters on Wednesday. Asked if the original was introduced as an additional indicator for inflation monitoring, Bajaj replied in the negative, “he said.” It’s the same.

The central bank has supported maintaining the existing inflation target of 4% in the 2 percentage point band.

The RBI said in a monetary and monetary report that “the current numerical framework for determining price stability, i.e. the inflation target of 4 per cent with a tolerance band of + / 2 per cent, is appropriate,” the RBI said in February for the next five years. .

The report states that “the study period for this report begins with the formal operation of the Flexible Inflation Target (FIT) framework in India but excludes the COVID-19 epidemic period due to data distortion.”

The six-member MPC, led by the RBI governor, decides on monetary policy with the inflation target band in mind.

With the rise in food and fuel prices, India’s CPI rose 5% in January from 4.1% in February to 3.8787% and 3.33%, respectively. The central bank’s latest monetary policy warning in February that reducing inflation could be short-lived, leading to higher output prices as demand returns to normal as demand returns to normal. This has raised the inflation forecast from 4.6-5-2% to 5-5.2% in the first half of the previous financial year while maintaining ease from low inflation.

Moody’s Analytics said in a report released on Tuesday that inflation in India is worrying. “Retail inflation has been above the RBI’s target of 4% for the last eight months. India’s core CPI (excluding food, fuel and light) rose 5.6% in February, from 5.3% in January. Unsustainable food prices and rising oil prices have pushed India’s CPI above the band of several% in 2020, hampering the RBI’s ability to maintain stable currency settings during the height of the epidemic. The headline high fuel prices will keep upward pressure on the CPI and deter the RBI from proposing further rate cuts, ”it added.

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