Policy dilemma

Central banks must focus on inflation

The inflation rate based on the consumer price index once again remained above the upper end of the Reserve Bank of India’s (RBI’s) tolerance band in February. Pushed up by higher prices of cereals and milk, among other things, the rate in February came at 6.44 per cent, marginally lower than the 6.52 per cent in January. The headline rate has thus remained above the 6 per cent mark for 12 out of the past 14 months. Given the inflation outcomes, the Monetary Policy Committee would need to revisit its projections. The committee was expecting an average rate of 5.7