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.