The Finance Ministry and the RBI will finalise a new monetary policy framework by December end under which the central bank will pursue the retail inflation target to be decided by the government.
According to official sources, the internal work for the new monetary policy framework is in advanced stages and the government will have to take a final view on it in consultation with the RBI.
Under the new framework, the interest rate will be decided by a monetary policy committee with a view to ensuring that inflation remains within the targeted levels.
Finance Minister Arun Jaitley had in his Budget speech on July 10 said: “It is also essential to have a modern monetary policy framework to meet the challenge of an increasingly complex economy. Government will, in close consultation with the RBI, put in place such a framework.’’ The new framework, sources said, had to be decided by December end so that the initiatives could be included in the Action Taken Report, which has to be tabled in Parliament by January 15.
