Failure to meet the monetary policy objective is defined in terms of average headline CPI inflation remaining lower or higher than the 2 to 6 per cent band for three consecutive quarters, rather than any instance where inflation exceeds / falls below the target. This helps monetary policy to avoid undue volatility in rate setting behaviour that may adversely impact growth.
The repo rate was defined as the policy rate and a monetary policy committee (MPC) was set up in the RBI – with both internal and external members – to determine the repo rate with the objective of achieving the mandated inflation target.