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Implicit & explicit: RBI policy statement is all about forward guidance

One challenge that the RBI might have to face in FY22 is the movement in exchange rate

Topics
RBI monetary policy | RBI Policy | Indian Economy

Soumya Kanti Ghosh 

Soumya Kanti Ghosh

The RBI policy statement is all about forward guidance: both implicit and explicit. First, the RBI shift from time-based guidance to state-based guidance is a commitment to support growth in an implicit manner in the current uncertain environment. Time-based is more explicit, state-based is more implicit.

For example, growth on a durable basis is not quantifiable but merely an implicit guidance on the state of the economy. Second, the explicit guidance of a guaranteed liquidity in the secondary market. Interestingly, such an assured OMO support was resorted to by Bank Indonesia and BSP ...

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First Published: Thu, April 08 2021. 01:09 IST
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