One of the defining moments of the policy announcement is continuing to maintain an explicit forward guidance of keeping the rates and accommodative stance on hold till at least mid-2021, a practice initiated by Sveriges Riksbank. Many large central banks, such as the ECB, were initially averse to such an idea, favouring a more implicit rather than explicit guidance — like Lucas Papademos, a former vice-president of the ECB. He had differed with the erstwhile Fed Chairman Ben Bernanke who was more explicit in outlining the course of Fed measures after the Lehman Brothers debacle. Bernanke argued, and correctly, that explicit forward guidance may be more useful to assuage market sentiments when uncertainty is very high, and in EMEs — having inadequate market depth and being more reactive — explicit forward guidance is more appropriate. From that perspective, the MPC’s stand in this and the previous policy is perfectly justified.
TO READ THE FULL STORY, SUBSCRIBE NOW NOW AT JUST RS 249 A MONTH.
Already a premium subscriber? LOGIN NOW
What you get on Business Standard Premium?
- Unlock 30+ premium stories daily hand-picked by our editors, across devices on browser and app.
- Full access to our intuitive epaper - clip, save, share articles from any device; newspaper archives from 2006.
- Curated newsletters on markets, personal finance, policy & politics, start-ups, technology, and more.
- Pick your 5 favourite companies, get a daily email with all news updates on them.
- 26 years of website archives.
- Preferential invites to Business Standard events.
Subscribe to Business Standard Premium
Exclusive Stories, Curated Newsletters, 26 years of Archives, E-paper, and more!
First Published: Fri, December 04 2020. 23:35 IST