ADVERTISEMENT
Price-Level Targeting Would Mean More Rate Cuts in India: Chart
A temporary breach of the 4% inflation target from October is likely to put pressure on the RBI to abandon its current stance
31 Oct 2019, 06:21 AM IST 
An Indian national flag flies at the Reserve Bank of India (RBI) building in Mumbai, India. (Photographer: Kanishka Sonthalia/Bloomberg)
(Bloomberg) --
A temporary breach of the 4% inflation target from October is likely to put pressure on the Reserve Bank of India to abandon its accommodative stance, but that would be a mistake, according to Bloomberg Economics. BE applies an alternative approach to managing inflation: targeting the consumer price index based on the 4% mid-point inflation target. BE’s analysis applying this method indicates the existing negative inflation gap is only expected to widen ahead, so a halt in monetary easing now could create a negative feedback loop similar to the RBI’s 2018 policy mistake of prematurely raising rates and hurting growth.
©2019 Bloomberg L.P.