Economists Urge RBI to Keep Current Inflation Framework
Thank you for reading this post, don't forget to subscribe!A poll of 15 top economists reveals near-unanimous support for the Reserve Bank of India (RBI) to maintain its current inflation-targeting framework. In place since 2016, the framework aims to keep headline inflation at 4% with a tolerance band of 2–6%.
Here’s a breakdown of the key findings:
- Targeting Headline Inflation: Over 90% of economists believe the RBI should continue targeting headline CPI (which includes food and fuel), arguing that this is what matters most to the public. They reject the idea of switching to core inflation.
- Retaining the 4% Target: All 15 economists agreed that the 4% inflation target should remain unchanged. They believe raising it would signal a lack of commitment to controlling inflation, despite rising global trends.
- Maintaining the 2–6% Band: While most economists (80%) want to keep the current ±2% tolerance band, a smaller group (20%) suggested narrowing it to 3–6%.
- Keeping the Point Target: All economists stressed the importance of keeping both the 4% point target and the 2–6% range. They believe this dual approach provides credibility and helps anchor inflation expectations.
The poll’s results suggest a strong consensus among economists that the existing framework is effective and should be continued to ensure price stability remains a key focus of monetary policy.
