Inflation target News

RBI will submit failure report to Govt first time since the implementation of law. RBI needs to submit if it fails to keep the inflation below six per cent for 3 consecutive quarters. The RBI has been aggressively raising the key interest rate since May in a bid to contain inflation.

The Monetary Policy Committee headed by RBI Governor Urjit Patel last month cut benchmark interest rates by 0.25 percent to 6.25 percent.

The Federal Reserve is close to hitting its targets for full employment and 2 percent inflation, the Fed`s No. 2 policymaker said on Sunday in comments that did not address when the U.S. central bank should next raise interest rates.

With the government setting inflation target at 4 percent, the Reserve Bank is unlikely to make much shift in its stance going forward and may go for a 25 bps cut in the second half of the fiscal.

Former Reserve Bank governor Duvvuri Subbarao has doubted achieving the 4 percent inflation target set under the new MPC set-up given the narrow margin the new price index has now and the way prices have been moving up in recent months.  

 In the latest, ECB has left the interest rates at record low. ECB President Mario Draghi expected inflation to pick up in second half of 2016.   

The RBI has projected consumer inflation will hit 6 percent by January 2016 before gradually easing to 4 percent two years later.

India has formally adopted inflation targeting, a historic monetary policy overhaul that marks a victory for Reserve Bank of India Governor Raguram Rajan, as the government makes subduing chronically volatile prices a priority.

"The Reserve Bank will aim to bring inflation below 6 per cent by January 2016. The target of financial year 2016-17 and all subsequent years shall be four per cent with a band of (+/-) 2 per cent," the agreement said.

Of the total, 50 basis points cut is expected within a couple of months, said the Standard Chartered report.

"Going forward, we will discuss an appropriate timeline with the government in which the economy should move to the centre of the medium term inflation band of 2-6," Rajan said in a lecture at an industry event.