The government is likely to leave the inflation targeting band for its central bank unchanged, according to people familiar with the matter, while policy makers remain focused on rising prices amid the rebound from the pandemic. A consumer-price inflation band tracked by the Reserve Bank of India is likely to be retained at the current 2 per cent-6 per cent range, said the people, who asked not to be identified citing rules before the framework is finalized by March 31.
The government is mulling small changes to the system, including safeguard options that offer leeway in cases of an exceptional events, they said, without providing further details.
A spokesperson for the Finance Ministry declined to comment, while the RBI didn’t immediately respond to an emailed request for comment.
Volatile food prices and a sustained rise in global oil led consumer prices to exceed the upper band several times last year, threatening to limit the central bank’s ability to keep monetary policy loose to help stimulate the economic recovery. The situation also posed political risks for Prime Minister Narendra Modi’s government in the run up to key state elections.
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