NISM Certifications · NISM-Series-XV: Research Analyst · Economic Analysis
Under a flexible inflation targeting framework in India, what is the mandated inflation target for the Monetary Policy Committee, and the tolerance band?
The target is 4% CPI inflation with a tolerance band of plus or minus 2 percentage points, meaning a range of 2% to 6%. The Monetary Policy Committee must keep inflation within this range under the flexible inflation targeting framework.
- A4% with a band of +/- 2%Correct
- B5% with a band of +/- 1%
- C4% with a band of +/- 1%
- D6% with a band of +/- 2%
Explanation
The framework sets a CPI inflation target of 4% with a tolerance band of 2% on either side, i.e. 2% to 6%. Other options misstate either the target or the band width.
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