Ep 193: The Fight of the Central Banker
The Seen and the Unseen - hosted by Amit Varma
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Central Bank Policy Rate
In india, the central bank policy rate is set at 4% with a band of plus minus 2%. The committee that makes this decision has to give transparent minutes as to why they voted to increase or decrease rates. And if the central bank fails to maintain inflation within the band of two % to six % for three quarters in a row, it has to give a testimony to the parliament and explain what factors led to not attaining its object. This kind of arrangement is important because it will prevent what is called 'fiscal dominance', when governments focus too closely on short-term needs rather than long term objectives.
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