RBI to soon release discussion paper on flexible inflation targeting framework
The Reserve Bank of India is set to release a discussion paper on its flexible inflation targeting (FIT) framework, which mandates maintaining CPI inflation at 4% with a +/- 200 basis points band. As the current target is valid until March 2026, the review will involve public consultation and government input, considering the debate around targeting non-food inflation.
Reuters Reserve Bank of India The Reserve Bank of India will soon issue a discussion paper on the flexible inflation targeting (FIT) framework, said governor Sanjay Malhotra.
Formally adopted in 2016, the current FIT framework tasks the RBI with keeping retail inflation measured by Consumer Price Index at 4% in the medium term, with a band of 200 basis points on either side providing it with flexibility.
'Our target is certainly headline inflation. The FIT is due for a review. Every five years we do it. There is a discussion paper, which we are preparing. We will open to public consultation. The final view has to be taken by the government. We will give our views to the government as to how we should move ahead in this regard,' Malhotra said. The inflation target is valid until March 2026 and its review comes amid talk of whether monetary policy should target non-food inflation. Malhotra said that both headline CPI as well as core inflation are important. 'There is higher volatility in food prices. They can be transient. And sometimes, we have to look through if we feel that some of the inflation is because of transient reasons,' he said.
Core inflation excludes volatile components of food & fuel.
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