- Days before its second bi-monthly monetary policy review, the RBI has said that its best tool to control inflation was rate of interest, and the govt’s tools were increasing agricultural production and improving supply.
- Recent forecast has indicated that food prices may skyrocket dousing the expected increase in CPI that may have resulted because of the seasonal effects from vegetable prices.
- While core inflation has been slowly reducing, consumer price index (CPI) inflation rose to a 4-month high. This is expected to come down considerably by March 2016.
- Instead of focusing on the rupee to manage inflation, the RBI said that it will focus on creating conditions inside the country for reducing inflation.
- The govt should focus on tackling slow growth in economy, high inflation and twin deficits.
- In the current year, growth is expected to rise by 5%.
- RBI is a technocratic institution working with the govt, and is not directly involved in dealing with curbing black money as this is primarily a function of the government.
- Read at: http://www.thehindu.com/todays-paper/tp-business/interest-rate-is-the-best-tool-for-reserve-bank-to-control-inflation/article6014332.ece