CEA Questions RBI's Inflation Targetting Approach, Wants Review of The Current Framework | CNBC TV18

For the past 8 years, the RBI's Monetary Policy Committee sets interest rates according to an inflation targeting framework, which came into effect from 2015. According to the framework, the MPC has to ensure that the CPI inflation remains at 4%, +/-2%, i.e. the CPI has to remain in a range of 2-6%, but preferably at 4%. This framework got its first challenge yesterday when the Chief Economic Advisor (CEA) V. Anantha Nageswaran, in an article in Mint Newspaper, questioned the ability of RBI to control food prices via interest rates, when prices rise due to supply shortages. He also recommended that the RBI should go back to the old multi-indicator approach, where the central bank managed many goals like growth, inflation, financial stability, external stability. It is now likely that the MPC meetings, as we have known them, may end and we might witness a new or tweaked framework of monetary policy making.

How does the current inflation targetting framework work? Can we see tweaks in the framework and if yes, how? Catch Latha Venkatesh in a comprehensive chat with Mridul Saggar, Prof-IIM-Kozhikode & Ex-ED RBI.

#rbi #inflationtargetingframework #foodprices #foodinflation #cea #vananthanageswaran #cnbctv18 #businessnews #businessnewstoday #businessnewsinenglish #sharemarkettoday

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