RBI panel wants retail inflation as new policy benchmark

The Urjit Patel committee on monetary policy framework has proposed setting up of a monetary policy committee (MPC) that will be headed by the Reserve Bank of India (RBI) governor and accountable for achieving inflation target set by it.

The report of the Patel committee, set up by RBI in September last year, has recommended that retail inflation, measured by the Consumer Price Index (CPI), replace wholesale inflation as the price anchor.

The responsibility of the central bank, the panel has suggested, should be to bring the retail inflation rate down at four per cent, with a variation of 200 bps on either side, in three years.

“The nominal anchor should be defined in terms of headline CPI (-based) inflation, which closely reflects the cost of living and influences inflation expectations relative to other available metrics,” the report has said.

If the MPC fails to achieve its target for three quarters in a row, it has to issue a public statement, mentioning reasons for failure and remedial measures, with signatures of all the five members. Read More

Source: http://www.rediff.com/


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Categorised in: Retail, Sector News

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