Monetary policy in the pandemic

There is a great deal of concern about the path of monetary policy, given that headline inflation has breached the required range, from 2 to 6 per cent consumer price index (CPI)-based inflation, in seven of the last eight months. The inflation data, however, reveals a surge in prices in April 2020, which was also the month where the lockdown hampered supply. As supply constraints ease, inflationary pressures are likely to ease. The monetary policy committee (MPC) is on the right track in seeing through these short-term fluctuations and looking at forecasts of inflation about 12 to 18 months ahead.

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