(FE)
Under governor Urjit Patel, India’s central bank will target inflation of 4 percent, three officials familiar with its thinking said, adopting a narrower reading of its mandate than markets in a bid to stamp out rampant price rises of the past.
The differing interpretations of amendments to last year’s Reserve Bank of India (RBI) Act reflect sometimes strained relations between the market and the central bank, and are proving a test for Patel some eight months into his tenure.
The amendments were part of landmark changes to India’s monetary policy pushed by Patel, then deputy governor, and his predecessor as governor, Raghuram Rajan, and require the RBI “to contain inflation within the specified target level” of 4 percent, but within a tolerated band of 2-6 percent.
