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RBI and the markets
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Stock prices jumped up and down with wild abandon immediately after the Reserve Bank of India (RBI) announced its new monetary policy. The stock market, true to tradition, was listening keenly to what the central bank had to say.
But it seems that RBI is returning the compliment. Over the past few years, the central bank has been paying more and more attention to what is happening in the global and local financial markets. Earlier, RBI used to say that it managed the twin tasks of supporting economic growth and keeping a lid on inflation.
Now, it appears, there is a third key goal—financial stability.
Tuesday’s policy has a detailed analysis of what is happening in the markets. At least two recent policy statements also talked about “tail risk"—a phrase borrowed from dealing rooms. And, says RBI while defining its task ahead: “Financial stability may assume greater importance in the months to come."
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