In this context, the Road Map 2018 reviews the policy actions that have been pursued during 2017 and more importantly, proposes policies and actions for the forthcoming period. Accordingly, the outline of the Road Map 2018 is as follows: Section 2:  The Central Bank’s monetary policy strategy and policies for 2018 and beyond  Section 3:  The Central Bank’s policies related to the financial sector performance and stability in 2018 and beyond  Section 4:  Key policies related to strengthening the broader economy through the Central Bank’s agency and ancillary functions  Now, let me elaborate on these sections in a detailed manner. 8  2. Monetary Policy Strategy and Policies for 2018 and Beyond The Central Bank is entrusted with the task of maintaining price stability. Price stability remains a key fundamental in fostering an environment conducive for sustained growth and securing rising living standards for the people. The Central Bank seeks to achieve its price stability objective through the conduct of monetary policy. Based on the current monetary policy framework, we have been able to maintain inflation in single digits for close to a decade. Going forward, the introduction of an effective Flexible Inflation Targeting (FIT) framework will improve our capacity to deliver price stability. This will provide a more propitious environment for growth and employment generation.
Our motivation towards adopting inflation targeting as the monetary policy framework was signaled a number of years ago, as we recognised it as the most appropriate way to escape from the high inflation-low growth trap. The weakened relationship between money and inflation and deepening financial markets were among the major factors that encouraged this move. Under the proposed FIT framework, the Central Bank will aim to preserve price stability of the economy by targeting an inflation range of 4-6 per cent. We believe that this target range is desirable for a country like ours in view of the vulnerability of the economy to supply or external shocks. We will employ market-based instruments, particularly the policy interest rates and open market operations (OMO) of the Central Bank, to influence market conditions and to navigate inflation in the targeted mid-single digit range. Variables such as overall monetary expansion and credit disbursements to the private sector by commercial banks will remain as key indicative variables to guide monetary policy conduct. We have now progressed into a time-bound plan to make this leap towards FIT a reality. The period starting from 2018 will be vital in laying out required reforms to facilitate a smooth transition to a FIT framework. In this context, we have identified three important pillars as the building blocks for adopting a FIT framework; 1. Strong Central Bank mandate and credibility 2. Effective monetary policy conduct 3. Strong fiscal policy support and commitment Now let me discuss some key elements and building blocks of FIT.