update

RBI kicks off discussions with finance ministry on monetary policy framework

     The Reserve Bank of India (RBI) has kicked off discussions with the government on a proposed monetary policy framework that is anchored on Consumer Price Inflation (CPI) and will target a particular level of inflation. Though, the preliminary discussions have begun by both the parties, but the monetary policy framework would be deliberated over the course of the year and the framework will be developed along with the finance ministry.
     This development is much in line with government’s endorsement for the need of better monetary policy framework in the budget speech by Finance Minister, Arun Jaitley. Also, this synergy would make it easier for RBI, the inflation fighting machine, to achieve its target of bring down the retail inflation to 8% by January 2015 and 6% by January, 2016.
     However, Finance Minister Arun Jaitley, who attended the board meeting, underscored the central bank would take a final call on its 6% inflation target by March 2016. Meeting this ambitious target by RBI would not be an easy task, in the backdrop of country facing a partial drought in some regions and its dependency on costly oil imports. Consumer price inflation spiked to 11.2% last November before three interest rate hikes ordered by Rajan helped bring inflation down to 7.3% in June.