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LATEST NEWS UPDATES | Monetary policy alone can’t tame inflation: FM -Vikas Dhoot

Monetary policy alone can’t tame inflation: FM -Vikas Dhoot

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published Published on Sep 8, 2022   modified Modified on Sep 9, 2022

-The Hindu

Growth impulses also need to be ‘unfettered’ in current situation, says Sitharaman

In a barely veiled signal to Mint Street, Finance Minister Nirmala Sitharaman said on Thursday that monetary policy tools like interest rate increases deployed by several central banks would not suffice to cool inflation and suggested that the Reserve Bank of India need not synchronise its actions ‘as much’ with its counterparts in developed countries. 

While monetary policy as a solution for containing inflation had been considered ‘sacrosanct’, the minister indicated that growth needed attention too, while countries that had been exponents of the monetary policy theory that only increasing interest rates could rein in inflation, had been totally ineffective in managing price rise, Ms. Sitharaman said. 

“Why does one country in that network have a 79% [inflation] and why [does] some country, which is the fountainhead of such theory, have the highest inflation in 40 years,” she asked rhetorically. “Why would other members of that clique of nations also [be looking] at 8%-9% [inflation],” she wondered. 

India’s experience in handling inflation showed that many different factors needed attention and while the central bank and its instruments like interest rates form a ‘very critical part of it’, they could not be the only one, the minister observed.  

“I say it with a sense of responsibility… yes, it is one of the tools, but sometimes, for instance in India, if you were to leave the policy makers and talk to people on the ground, they would say, particularly in the situation we are in now, where economic growth would have to be unfettered,” she said.

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The Hindu, 8 September, 2022, https://www.thehindu.com/business/Economy/monetary-policy-alone-cant-tame-inflation-fm/article65866747.ece?homepage=true


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