RBI Governor Shaktikanta Das has identified geopolitical tensions as a significant new challenge for monetary policy. He explained that these global events, alongside supply disruptions and labour market tightness, are contributing to multi-decade high inflation. Central banks face a difficult balancing act: acting too aggressively to curb inflation risks recession, while acting too slowly could lead to prolonged economic damage. This uncertainty is causing volatility in financial markets worldwide.
Monetary Policy and Central Bank Communication
(Address by Shri Shaktikanta Das, Governor, Reserve Bank of India - March 4, 2022 - Delivered at the National Defence College, Ministry of Defence, Government of India, New Delhi)
I am happy to have been invited by the National Defence College (ND
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FAQ :
The main new challenge identified is geopolitical tensions.
Factors include supply disruptions, tighter labour markets, fragility in inventory management, and geopolitical disturbances.
Central banks face a dilemma between acting aggressively to contain inflation, which risks causing a recession, or acting too late and potentially harming growth.
Financial markets globally have become extremely volatile as they grapple with heightened uncertainty over the pace of future monetary policy normalisation.
The RBI believes in two-way communication, engaging with stakeholders and using various tools like MPC resolutions, press conferences, and reports to explain policy rationale and build credibility.