Image Source: Business Standard
India’s central bank governor has formally submitted recommendations to the government on the future of the inflation targeting framework. The RBI is expected to back retaining the current 4% headline inflation target with a tolerance band of 2–6%, while reviewing structural adjustments to strengthen credibility and economic resilience.
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Key Highlights:
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The Reserve Bank of India (RBI) has delivered its recommendations on the inflation targeting framework, a crucial policy anchor guiding monetary decisions.
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The current framework mandates a 4% headline inflation target with a tolerance band of 2–6%, last reviewed in 2021.
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According to sources, the RBI is likely to recommend continuity of the existing target, citing its credibility and effectiveness in stabilizing inflation expectations.
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A revamped Consumer Price Index (CPI) series, expected in early 2026, may reduce volatility and provide sharper insights for policy calibration.
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Economists highlight that while inflation has largely remained within the band, growth considerations will continue to influence Monetary Policy Committee (MPC) decisions.
Contextual Insights:
The recommendations come ahead of the March 2026 statutory review deadline. Analysts believe retaining the current framework signals policy stability, reassuring markets and investors. However, the RBI has also flagged the need for flexibility to respond to global shocks and domestic supply-side pressures.
Sources: Reserve Bank of India Bulletin, DBS Group Research, Reuters
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