Maintaining status quo on inflation targetting, the government on Wednesday extended 4 per cent retail inflation target for the Reserve Bank of India for the next five years. Under the current mechanism, the RBI has been mandated by the government to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side.
"The inflation target for the period April 1, 2021 to March 31, 2026 under the Reserve Bank of India Act 1934 has been kept at the same level as was for previous five years," Economic Affairs Secretary Tarun Bajaj said. To keep inflation under the specified level, the government in 2016 decided to set up the Monetary Policy Committee headed by RBI Governor entrusted with the task of fixing the benchmark policy rate (repo rate).
The six-member MPC, which had its first meeting in October 2016, was given the mandate to maintain annual inflation at 4 per cent until March 31, 2021 with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.