RBI panel on monetary policy may set CPI as main gauge: Nomura

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RBI panel on monetary policy may set CPI as main gauge: Nomura
Mumbai, Dec 13 (PTI) Japanese brokerage Nomura today said the Reserve Bank committee on monetary policy framework may declare ensuring price stability as the prime objective of the central banks' policy. "We expect the committee to recommend a move towards price stability -- low and stable inflation as the sole policy objective -- instead of the current multiple indicator approach," Nomura India economists Sonal Varma and Aman Mohunta said in a note.

The report noted that at present there is no nominal anchor for the monetary policy and the committee will recommend usage of consumer price inflation as the standard to gauge the price stability as against the wholesale price index now. The RBI has been repeatedly saying that it looks at both the CPI and WPI data to arrive at monetary policy responses. RBI Governor Raghuram Rajan had announced a series of measures, which included formation of a committee headed by deputy governor in-charge of monetary policy Urijit Patel to look into the monetary policy aspect and make it more "transparent and predictable".

The committee is expected to submit its report by the end of this month. Only a handful of countries such as Japan, Britain, New Zealand have a mandated inflation target. In these countries Parliament sets the inflation target for the central bank. "In our view, the RBI will move away from WPI inflation as its primary inflation target because it largely reflects tradable goods price inflation, which is more relevant for producers and does not capture inflation in non-tradables (services), which is more relevant for consumers," Nomura analysts said. (

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