The RBI must write a letter explaining why the target was missed.

Mumbai:

RBI Governor Shaktikanta Das said on Friday that the central bank considers the communication with the government that the inflation target is not met as a privileged communication and will not be made public.

Under the medium-term inflation targeting framework formed after the central bank reached an agreement with the government, the RBI had to write a letter explaining why the target was missed and detailing when the 4 percent target might be reached.

The deal gives both sides 2 percentage points of leeway, with inflation breaching 6% (the upper end of the range set by the Reserve Bank of India) for eight straight months.

Consumer price inflation is also widely expected to exceed 6% in September, and the Oct. 12 release will trigger the terms of the agreement, which must be explained.

This will be the first time the RBI will explain its actions in a letter since the framework was introduced in 2016.

“This is (this letter) a privileged communication between the Reserve Bank and the government. At the moment, I can’t say whether it will be made public. On our side, we will not it public because it is a privileged communication from the central bank to the government. ,” Das told reporters on Friday.

The Monetary Policy Committee, which meets every two months to formulate policy action, will to discuss the content of the letter to be sent to the government, he said.

Das also said the RBI had been expecting inflation to fall close to its 4% target over a two-year cycle and continued to believe it would fall.

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According to RBI estimates, inflation averaged 6.7% in FY23, 7.1% in Q2, 6.5% in Q3 and 5.8% in Q4. It estimated the headline figure to cool to 5.1% in 1QFY23. =

(Apart from the title, this story was unedited by NDTV staff and was posted from a syndicated feed.)