Government notifies inflation target under monetary policy framework agreement

Q.  Government has notified inflation target range within which range for the next 5 years under the monetary policy framework agreement with the Reserve Bank?
- Published on 09 Aug 16

a. 4%+/- 1
b. 4%+/- 2
c. 5%+/-1
d. 5%+/-2

ANSWER: 4%+/- 2
Government has notified 4 percent inflation target with a range of plus/minus 2 percent for the next 6 years under the monetary policy framework agreement with the Reserve Bank
  • Powers conferred by Section 45ZA of the RBI Act 1934, central government in consultation with the bank hereby notified the inflation target beginning from the date of publication of the notification and ending on March 31, 2021
  • Notification fixes inflation target at 4 percent with upper tolerance level of 6 percent and lower limit of 2 percent for 2016-2017 and subsequent years
  • Government has amended the RBI Act through Finance Act 2016 for providing the Monetary Policy Committee with a specific inflation goal yet does not notify the inflation target
  • Central government in consultation with the RBI shall determine the inflation target in terms of the CPI once every five years
  • Central government has initiated the process of setting up an MPC which will take over the job of interest rate setting from the central bank.

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