Central Banks' Dilemma: Balancing Price Stability and Growth

Reserve Bank Governor Shaktikanta Das highlighted the trade-offs between achieving price stability and sustaining growth. He emphasized the need for central banks to use multiple instruments for balanced economic policies. Das also remarked on the Indian economy's resilience and the importance of financial stability for macroeconomic health.

Reserve Bank Governor Shaktikanta Das has emphasized the potential trade-offs that could arise between price stability and economic growth during a central bank's efforts to stabilize prices. Speaking on Tuesday, Das noted that pursuing price stability often requires significant sacrifices in growth.

In his address at the Himalaya Shumsher Memorial Lecture in Kathmandu, Das stressed the need for central banks to deploy a range of instruments such as monetary policy, macroprudential regulation, and micro-prudential supervision. He acknowledged that achieving price stability could sometimes be at odds with maintaining financial stability.

Das pointed out that in the Indian context, the Reserve Bank of India (RBI) has adopted a broader approach that goes beyond just price stability to include financial stability. This comprehensive view has helped India shield its economy from multiple shocks in recent years and achieve improved macroeconomic fundamentals.

(With inputs from agencies.)