Amid rising inflation, Reserve Bank Governor D Subbarao today pitched for greater autonomy for the central bank saying that operational freedom would help it focus better on management of prices.
“Having autonomy frees the central bank from the pressure of responding to short-term developments, deviating from its inflation target and thereby compromising its medium term inflation goals,” Subbarao said in a speech at the SAARC Finance Governors’ symposium at Kumarakom in Kerala.
Monetary policy typically acts with a lag, and price stability therefore has to be viewed in a medium term perspective, he added.
Subbarao, last month, had also made a strong case for “legally-backed formal autonomy” for the RBI.
The Reserve Bank, he had said at Central Bank Governance Group in Basel, Switzerland, “should be given legally-backed, formal autonomy” as a pre-condition for setting up a Monetary Policy Committee (MPC) to advise the RBI.