The Reserve Bank should adopt the new consumer price index for anchoring the monetary policy, an expert panel set up by the central bank said today.
The committee also set the inflation target at 4 per cent with a band of plus or minus 2 per cent around it.
It also suggested that monetary policy decision making should be vested in a monetary policy committee (MPC) that should be headed the Governor.
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"The RBI should adopt the new CPI (combined) as the measure of the nominal anchor for policy communication," the Expert Committee to Revise and Strengthen the Monetary Policy Framework said, adding that "bringing down inflation must be accorded primacy".
"In view of the elevated level of current CPI inflation ...The transition path to the target zone should be graduated to bringing down inflation from the current level of 10 per cent to 8 per cent over a period not exceeding the next 12 months.
"and to 6 per cent over a period not exceeding the next 24 months period before formally adopting the recommended target of 4 per cent inflation with a band of +/- 2 per cent," the panel headed by RBI Deputy Governor Urjit R Patel said.
