India’s inflation target should be maintained at 4%: RBI Working Paper
By IANS| Published: 28th December 2020 11:27 pm IST
New Delhi, Dec 28 : India’s inflation target should be maintained at 4 per cent in the medium term, according to a working paper by the Reserve Bank of India (RBI).
The paper, published by the RBI’s Department of Economic and Policy Research, noted that central to monetary policy is the concept of ‘Trend Inflation’ to which actual inflation outcomes are expected to converge after short-run fluctuations die out.
Accordingly, the inflation target needs to be fixed in alignment with trend inflation to avoid unhinging inflation expectations and flattening the aggregate supply curve or imparting a deflationary bias to the economy.