Notwithstanding this recent inflation upsurge, monetary policy continues to be conducted to condition and contain perception of inflation in the range of 4.0-4.5 per cent. This is in line with the medium-term objective of 3.0 per cent inflation consistent with India’s broader integration into the global economy.
Recent global financial crisis has, however, shown that low levels of inflation and high levels of growth do not guarantee financial stability. Accordingly, there is an increasing emphasis that financial stability should also be an explicit objective of central banks besides price stability and growth. In India, however, financial stability was recognised as another important objective of monetary policy much before the crisis.