Focus On Inflation Control : RBI
The RBI’s Monetary Policy Committee (MPC) maintains its focus on curbing inflation by keeping the repo rate unchanged at 6.5% in February 2024 to align inflation with the 4% target.
- The MPC aims to achieve a medium-term target of 4% inflation within a band of +/- 2%.
- The MPC aims to withdraw accommodation gradually to align inflation with the target while supporting growth.
- An accommodative stance means the central bank is prepared to expand the money supply to boost economic growth.
- Withdrawal of accommodation will mean reducing the money supply in the system which will rein in inflation further.
- A recent RBI Bulletin states that Headline inflation rose to 5.7% in December 2023, primarily driven by food inflation, emphasising the need for continued vigilance.
- The MPC determines the policy interest rate required to achieve the inflation target.
- The RBI controls inflation and deflation by employing a variety of monetary policy tools such as:
- Repo rate, Reverse repo rate, Bank rate, Open market operations, Statutory liquidity ratio (SLR), Cash reserve ratio (CRR), Liquidity adjustment facility (LAF), and Market stabilization scheme.
