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Monetary policy can only target future inflation, says RBI Deputy Governor Michael Patra

Monetary policy can only target future inflation, says RBI Deputy Governor Michael Patra

Monetary policy can only target future inflation, says RBI Deputy Governor Michael Patra
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By Nishtha Pandey  Nov 24, 2022 6:36:57 PM IST (Updated)

The RBI's rate-setting panel — the Governor Shaktikanta Das-headed Monetary Policy Committee — has raised the benchmark interest rate by a total of 190 bps so far in 2022, in tandem with major central banks' battle against surging consumer prices.

Deputy RBI governor Michael Patra said that monetary policy could not influence the growth rate on its own, and that it can only target future inflation. While speaking in the SBI Conclave on Thursday, Patra added that monetary policymakers were created to make weather forecasters look good, adding that policymakers must rely on forecasts with inherent uncertainty.

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Patra further added that monetary policy has to be forward-looking, take into account lags in transmission, and not take into account any past inflation.
Meanwhile, the RBI's rate-setting panel — the Governor Shaktikanta Das-headed Monetary Policy Committee — has raised the benchmark interest rate by a total of 190 bps in 2022, in tandem with major central banks in the battle against surging consumer prices.
Central bankers in significant economies around the globe — be it in India or the US — have a difficult task at hand: balancing inflation, or the pace of increase in the price the consumer pays for a commodity, with just enough supply of money so that it doesn't hamper the economy two and-a-half years into the pandemic.  Read this to know what economists make of the MPC's likely path ahead.
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