Monetary Policy Committee (MPC) meeting on Inflation Targeting

In News

• The Reserve Bank of India (RBI) said that it would hold an additional Monetary Policy Committee (MPC) meeting recently.

Key Points

• Reason for Additional Meeting: 
  • The RBI has failed to maintain the consumer price index (CPI) inflation target within the 2-6 percent band for three consecutive quarters (January to September 2022)
• The Regulation 7 of the RBI MPC and Monetary Policy Process Regulations, 2016:
  • States that a separate meeting is required to be scheduled as part of the normal policy process to discuss and draft the report to be sent to the government.
•  Section 45ZN of the Reserve Bank of India (RBI) Act, 1934: 
  • States that in case the RBI fails to meet the inflation target, it has to present a report to the government explaining the reasons for the failure. 
  • In the report, the central bank will have to mention the remedial actions it proposes to take.

About Monetary Policy Committee (MPC)

• Constituted by: RBI under section 45ZB of the Reserve Bank of India (RBI) Act, 1934.
• Mission: Fixing the benchmark policy interest rate (repo rate) to restrain inflation within the particular target level (2% to 6%). 
• Chairman: the Governor of RBI
• MPC meetings:
  • Currently, the MPC meets six times in a financial year, which is every two months. 
  • The schedule of the MPC meetings for the entire financial year is announced in advance.
  • The monetary policy is published after every meeting with each member explaining his opinions. 

Source: IE