How accurate are RBI forecasts?
The accuracy of RBI’s inflation forecasts compare favourably with other central banks, according to an RBI study
The RBI overestimating inflation is part of a global trend since the 2008 financial crisis
Inflation forecasts lie at the heart of any central bank’s monetary policy decision-making. In India, the Reserve Bank of India (RBI) adopted the flexible inflation target (FIT) framework in June 2016 and a predetermined 4% inflation rate which made inflation forecasts critical in helping it decide whether to cut or hike rates. In recent years though, the RBI has overestimated the threat of inflation.