Chakravarthi Rangarajan on Monetary Policy After Liberalization
Ideas of India
The Importance of a Fixed Exchange Rate
At one point, I really found that there was no conflict because what we really had to do to control inflation was to raise the rate of interest. Now, to come back, we have matured much more over the last 20, 25 years or more and therefore, we will face problems. There could be some occasions in which we will probably could see sometime later that the domestic economy does not require a high level of interest rate. But if the foreign exchange market used to be reasonably stable, it might require a rate of interest, which is slightly higher.
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