Michael Debabrata Patra: The lighter side of making monetary policy

Speech by Dr Michael Debabrata Patra, Deputy Governor of the Reserve Bank of India, in the 9th SBI Banking and Economics Conclave, Mumbai, 24 November 2022. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

I am honoured to be invited to this year's Conclave. In a short span of eight years, the SBI Banking and Economics Conclave has emerged as an important platform of eminence and relevance for deliberating on issues shaping the banking system and more broadly, India's financial sector. This year, the backdrop is a daunting one.

Across the world, monetary policy authorities are engaged in the most aggressive and synchronized tightening in decades. They are resolute in their determination to put the genie of inflation back into the bottle. '75' is the new '25'. Their stances and forward guidance sound like the shrill calls of birds of prey. Financial markets are awash with surges of volatility – incoming data trigger either risk-off stampedes or relief rallies. Globally, a widespread fear is that the forceful monetary policy tightening will precipitate a hard landing, i.e., a recession, or several of them. Geopolitical strife with no end in sight, centrifugal forces threatening to tear apart the unifying influence of global integration, and financial fragmentation are the new forces that seem to be chiseling the evolving global economic outlook.

I thought that I would take this opportunity to step back from the heat and flying debris now being associated with the outcomes of monetary policy actions. Instead, I propose to slip backstage and peer into what goes on underneath these outcomes. Perhaps, this may help to understand the outcomes a little better. Perhaps, it will enable a more compassionate view of the people involved in the making of monetary policy, their trials and tribulations.