First Quarter Review of the Monetary Policy for 2010-11
-Announced on the 27th July 2010
III. The Policy Stance
Mid-Quarter Review of Monetary Policy
58. At present, scheduled policy announcements are made once in a quarter. In a rapidly evolving macroeconomic situation, however, a gap of a quarter between policy reviews can be too long. In recent years, there have been several occasions (April, June and September-December 2008; January and March 2009; and March and July 2010) when the Reserve Bank had to take off-cycle policy actions in response to macroeconomic developments. While these instances challenge the discipline of the quarterly schedule, they also underscore the need for flexibility to manoeuvre. Many major central banks in the world make monetary policy announcements more frequently ranging generally from 8 to 12 announcements in a year. It is, therefore, proposed to formalise what is already an informal, internal process.
59. Accordingly, the Reserve Bank will now undertake mid-quarter reviews roughly at the interval of about one and half months after each quarterly review. As per schedule, mid-quarter reviews will be in June, September, December and March. They will be by way of a press release, which will provide a rationale for either action or maintenance of the status quo.
60. Mid-quarter Reviews are intended to communicate our assessment of economic conditions more frequently. By instituting these, it is our intention to take the surprise element out of the off-cycle actions. However, the Reserve Bank will have the flexibility, as always, to take swift and pre-emptive policy action, as and when warranted by the evolving macroeconomic developments.
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