SME Times News Bureau | 07 Mar, 2015
Global financial services firm Moody's on Thursday lauded India for
setting up a new mechanism to tame inflation through the Reserve Bank of
India (RBI).
"The new mechanism targeting inflation will
increase predictability of the central bank's monetary policy and the
effectiveness of its tools to take future price trends into account,"
Moody's investors service associate analyst Shirin Mohammadi said in a
statement here.
The central government has recently (February 20)
signed an agreement with the RBI to reduce inflation to less than six
percent by January 2016 and four percent by March 2017.
Terming
the initiative 'credit positive' in terms of rating, the US-based credit
rating agency's representative said that quantitative inflation would
usher in transparency in the monetary policy and enable the stakeholders
to know the drivers of the RBI's actions.
"The new mechanism
will anchor inflationary expectations and increase the monetary policy's
effectiveness in achieving the desired results," Shirin said.
Cautioning
that unchecked inflation may hurt growth, the global credit rating
agency said it (inflation) was driven high by food and commodity prices
from 2011 to 2014, compromising growth.
"Increase in transparency
and effectiveness of monetary policy will check volatility in capital
flows into the country and support institutional framework," the
statement added.