Happy birthday, inflation targeting

Topics Inflation | RBI | India economy

The story of inflation targeting in India starts in November 2005, when CPI inflation jumped to 5.3 per cent. As the graph shows, the decade leading up to inflation targeting was one long inflation crisis. This raised new questions about monetary policy strategy, and also about the principal-agent relationship between the Parliament/Ministry of Finance on the one hand and the Reserve Bank of India (RBI) on the other.  The economy had become more integrated into the world, and greater financial deepening had come about. As a consequence, the intuition of monetary policy in a closed e.....

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