RBI Monetary Policy Committee Meet On Inflation Miss Ends

The MPC met to deliberate on the report that the RBI will send to the government for failing to keep inflation within target.

<div class="paragraphs"><p>The RBI Building. (Source: BQ Prime)</p></div>
The RBI Building. (Source: BQ Prime)

The Monetary Policy Committee met on Thursday to deliberate on the report that the central bank will send to the government for having missed its inflation target.

An additional meeting of the Monetary Policy Committee was held on Nov. 3 to discuss and draft the report to be sent to the government by the Reserve Bank of India under the provisions of the RBI Act on the monetary policy process regulations, the central bank said in a press release. The meeting, chaired by Governor Shaktikanta Das, was attended by all MPC members.

Under Section 45ZN of the act, the central bank is required to submit a report to the central government explaining the reasons for its failure to achieve the inflation target, remedial actions proposed to be taken by the bank, and an estimate of the time-period within which the inflation target shall be achieved pursuant to timely implementation of proposed remedial actions.

The inflation targeting framework requires that inflation remains within the tolerance band of 4%(+/-2%). Headline inflation has stayed above the RBI’s upper target for nine straight months, and stood at 7.41% in September.

In a speech on Wednesday, Das had said it is up to the government to decide when it chooses to make the contents of the letter public. "I don't have the privilege or the authority to share the letter," he said.

The governor also said that the RBI's approach to tackle inflation has been the right one, even though there have been calls from some quarters that the central bank should have started tightening monetary policy much earlier. Had the central bank started hiking rates earlier than it did, it could have proven very costly for citizens as economic growth could have slumped, he added.