You are here: Home » Opinion » Columns
Putting Pele first
RBI hikes contactless card transaction limit to Rs 5000 to boost e-payments
Business Standard

The power of forward guidance

The point of dissonance is, however, regarding the surplus liquidity sloshing around the banking system and the fear that it might endanger financial stability

Topics
RBI | RBI repo rate | Banking system

Soumya Kanti Ghosh 



Soumya Kanti Ghosh

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 . 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.

SUBSCRIBE TO INSIGHTS

What you get on Business Standard Premium?

  • icon Unlock 30+ premium stories daily hand-picked by our editors, across devices on browser and app.
  • icon Full access to our intuitive epaper - clip, save, share articles from any device; newspaper archives from 2006.
  • icon Curated newsletters on markets, personal finance, policy & politics, start-ups, technology, and more.
  • icon Pick your 5 favourite companies, get a daily email with all news updates on them.
  • icon 26 years of website archives.
  • icon Preferential invites to Business Standard events.

OR


Subscribe to Business Standard Premium

Exclusive Stories, Curated Newsletters, 26 years of Archives, E-paper, and more!

Insightful news, sharp views, newsletters, e-paper, and more! Unlock incisive commentary only on Business Standard.

Download the Business Standard App for latest Business News and Market News .

First Published: Fri, December 04 2020. 23:35 IST

RECOMMENDED FOR YOU

.