The Reserve Bank of India in October will write to the government to explain its failure in meeting the inflation target as mandated in the monetary policy framework written into law in 2016, reported Business Line.
The explanation will be in the form of a letter from the RBI Governor to the government which will first be discussed at a specially convened meeting of the MPC in October, highly placed sources said. After discussions, the letter will be sent to the government.
The letter will be written in October as the September retail inflation print will be available by October 12, sources added.
The only solace for the RBI is that, globally, pretty much every inflation targeting central bank is facing an embarrassing failure due to the inflation crisis around the world.
Das is expected to address three main issues in the letter. First, give reasons on what led to the failure in meeting the target. Second, measures proposed by the MPC to rein in inflation and, lastly, the timeline proposed by the RBI to bring down retail inflation to 4 per cent.
As for the reasons that led to the target breach, the RBI Governor’s letter is expected to cite external factors that are beyond its control for this elevated and persistent inflation — global spillovers emanating from impact of pandemic and war.