Monetary policy committee must focus on financial stability now
Many in the market are hoping that the MPC's resolution statement contains an assessment of the current turmoil in credit markets brought about by the liquidity crunch at IL&FS
Monetary policy watchers are hoping that at its meeting this week, the MPC (monetary policy committee) goes beyond its expected guidance on growth and inflation to comment on financial stability. Now two years old, the MPC was set up with the mandate of determining a policy rate appropriate for achieving the mandated inflation target of 4%. But this time, it is not enough for the MPC to merely give its view on inflation and growth and state the upside or downside risks to them.