The RBI letter to the government on missing the inflation target, set under the flexible inflation targeting (FIT) framework, is a “privileged communication” and will not be made public, Reserve Bank Governor Shaktikanta Das said on Friday.
Under the framework, the RBI is expected to maintain consumer price based inflation (CPI), or retail inflation, at 4 per cent with a band of +/-2 per cent. In case of failure to maintain the inflation target for three consecutive quarters, the RBI has to write to the Centre explaining the reasons for missing the target.
In the letter, the RBI will have to mention about the proposed remedial actions it plans to take and the estimated time-period within which the inflation target will be achieved. “It (letter) is a privileged communication between the Reserve Bank and the government. From our side, we will not make it public,” Das told reporters when asked if the RBI will make the letter public.
The Consumer Price Index (CPI)-based inflation has been hovering above the upper band, i.e. 6 per cent, of the inflation target that RBI has to maintain, since January 2022.
The central bank will have to write the letter to the government once the September CPI inflation is released.
Das said the inflation levels currently are high as August CPI has come in at 7 per cent, and there is an expectation that the September number could be little higher than 7 per cent.
The CPI number for September will be released in mid-October.
“We are expecting inflation to come down close to the target over a two-year cycle. That was our expectation earlier and even now, but again there are so many uncertainties which are playing out and coming in from time to time.
“We will write a letter to the government. Let me not preempt what we will write,” the RBI Governor said.
The legal provision under the RBI Act says that the Monetary Policy Committee (MPC) has to have a meeting to discuss the RBI’s reply to the government, he said, without mentioning when the meeting will be held.