Can RBI policy be the blueprint for world’s central banks?

Passive inflation and the central bank’s full tank of gas make the case to cut even stronger. India is becoming the gold standard for monetary policy in Asia, if not the world.

While global markets are giddy from hints that the Federal Reserve may cut interest rates, India’s central bank has been easing since February. Just as important, the Reserve Bank of India has been very consistent in its message: Borrowing costs need to come down to juice growth. Passive inflation and the central bank’s full tank of gas make the case to cut even stronger. After Thursday's trim, the benchmark rate is 5.75%.
The RBI's approach is correct. There’s no point targeting inflation if growth is waning and the very thing you’re aiming at is dormant. Thursday's quarter-point reduction in the benchmark rate, the third in as many policy meetings, underscores the theme: “Growth impulses have weakened significantly,’’ according to the central bank’s statement. “A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern.’’ The RBI made clear that “global economic activity has been losing pace” and declared its stance to be “accommodative.” Much focus is rightly given to Beijing’s efforts to pull both fiscal and monetary levers; as big as India's economy is, China's is much larger. But the People's Bank of China tends to be opaque and is trying to thread the needle between buttressing the economy and fretting about financial stability. Japan, meanwhile, gets plenty of attention as a pioneer of unconventional policies – yet its economy remains a parable about how booms can end in tears. And remember back in February, the consensus was that the Fed had just paused before resuming hikes. Few serious observers believe that now.
Read more at:Can RBI policy be the blueprint for world's central banks?  &
//economictimes.indiatimes.com/articleshow/69674825.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.