India formally adopted flexible inflation targeting (FIT) in June 2016 to place price stability, defined in terms of a target CPI inflation, as the primary objective of monetary policy. In this context, the paper draws on Indian macroeconomic developments since 2000 and the experience of other...

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...