Q. Consider the following statements related to Flexible Inflation Targeting (FIT):
Which of the above statements is/are correct?
Q. Consider the following statements related to Flexible Inflation Targeting (FIT):
Which of the above statements is/are correct?
The correct option is A 1 only
Explanation:
Statement 1 is correct: Inflation targeting is basically a monetary policy system wherein the central bank of a country (RBI) has a specific target inflation rate for the medium-term and publicises this rate. According to the current framework, RBI has to maintain Inflation at 4% (+/- 200 bps). It has been given statutory backing by amending the Reserve Bank of India Act, 1934.
Statement 2 is incorrect: The Fixed inflation framework was signed in 2016 and came into force in 2016. Recently, the five-year mandate came to an end on 31st March 2021. The Government of India has decided to retain the same inflation target for the next five years.
Statement 3 is incorrect: The CPI is used as the anchor for the purpose of the monetary policy and interest rate decisions to influence inflation.
Explanation:
Statement 1 is correct: Inflation targeting is basically a monetary policy system wherein the central bank of a country (RBI) has a specific target inflation rate for the medium-term and publicises this rate. According to the current framework, RBI has to maintain Inflation at 4% (+/- 200 bps). It has been given statutory backing by amending the Reserve Bank of India Act, 1934.
Statement 2 is incorrect: The Fixed inflation framework was signed in 2016 and came into force in 2016. Recently, the five-year mandate came to an end on 31st March 2021. The Government of India has decided to retain the same inflation target for the next five years.
Statement 3 is incorrect: The CPI is used as the anchor for the purpose of the monetary policy and interest rate decisions to influence inflation.
