OTHER GROUP COMPANIES
market

RBI found it acceptable to target WPI inflation: Axis MF

This policy further cements the primacy of CPI inflation from the policy stand point

January 28, 2014 3:26 IST | India Infoline News Service
The RBI raised rates unexpectedly, but the bond market has taken the rate increase in its stride. The market has focussed on the guidance that further rate hikes may not be required going forward. The governor indicated that if inflation falls below the indicated trajectory, the RBI may turn accommodative, that is the RBI may cut rates if inflation declines.
This policy further cements the primacy of CPI inflation from the policy stand point. Historically due to the high correlation between WPI and CPI inflation, RBI found it acceptable to target WPI inflation with the expectation that CPI would follow. The past few years have shown that CPI inflation has remained persistently above WPI inflation. The RBI has therefore shifted to explicitly targeting headline CPI inflation. This is as recommended by the recent Dr Urjit Patel committee. The RBI has also accepted another of the committee's recommendations to follow a bimonthly cycle for policy. We expect over a period of time the RBI will implement the other recommendations of the committee.


OPEN A DEMAT ACCOUNT & Get
FREE Benefits Worth 5,000

FEATURED ARTICLE

BLOGS

Open Demat Account

  • 0

    Per Order for ETF & Mutual Funds Brokerage

  • 20

    Per Order for Delivery, Intraday, F&O, Currency & Commodity