...........The CPI, however, shows little correlation with other economic variables. Since the index is less than three years old, this could be passed off as a statistical quirk, a data-collection model that needs some tweaking—but with RBI putting out its first-ever CPI forecast and statement that “retail inflation is likely to remain around or even above 9 per cent in the months ahead, absent policy action”, it is apparent CPI is very much on RBI’s policy radar. This is much the same as it is in many developed economies, but the CPI there is more robust and RBI needs to look at other growth parameters as well, more so since inflation-targeting as the main policy objective was given up by most central banks a long time ago.................
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