Central to monetary policy is the concept of trend inflation to which actual inflation outcomes are expected to converge after short run fluctuations die out. Accordingly, the inflation target needs to be fixed in alignment with trend inflation to avoid unhinging inflation expectations and...

In India, there is a large divergence between CPI and WPI inflation trends in the past, wide dispersion in inflation across commodity groups within WPI, and significant volatility in headline WPI inflation under the influence of supply shocks, the statistical limitations of prices data have...

Expectations of firms and households about the future trajectory of inflation tend to influence their current investment and consumption/saving decisions, and the price and wage-setting behaviour. By firmly anchoring inflation expectations, monetary policy can prevent a wage-price spiral and...