The Reserve Bank of India (RBI) has opened a fresh round of public consultation on the review of the monetary policy framework. The flexible inflation targeting (FIT) regime, which was adopted in 2016, is due for renewal in March 2026. At its heart lie four questions: - Should policy be guided by headline or core inflation? - Is the current 4% target optimal? - Should the tolerance band be recalibrated? - And should India retain a point target
Business News›Prime›Economy›Don’t react to every onion, tomato price spike; but target headline inflation
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Don’t react to every onion, tomato price spike; but target headline inflation
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Synopsis
Globally, most central banks target headline inflation but treat core inflation as a more reliable guide for monetary policy decisions. For India, the choice is particularly delicate because food carries nearly half the weight in the CPI basket, compared to a significantly lower proportion in advanced economies.
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