Economics
RBI’s Policymakers Spar Over High Inflation, Steep Yield Curve
- Shape of curve shows ‘lack of credibility’ on guidance: Varma
- Term premium closely linked to liquidity condition: RBI piece
The RBI has resorted to unconventional measures such as Operation Twist -- buying bonds and selling shorter paper -- in a bid to ease long-term yields.
Photographer: Dhiraj Singh/BloombergThis article is for subscribers only.
A debate is raging among India’s monetary panel members on the credibility of the central bank’s inflation forecasts, raising questions over its price-growth targeting regime.
The argument between Michael Patra, the deputy governor for monetary policy, and J.R. Varma, a new member of the rate-setting panel, centers around whether the nation’s steep yield curve reveals a lack of market confidence in the Reserve Bank of India’s inflation estimates or is a reflection of excessive focus on old data.