However, if there are excessive demand pressures either because of high fiscal deficit or because of the excessive foreign inflows money supply grows faster than the growth in productive sectors and generates demand pressures which manifests itself in rise in inflation rate. Despite all contests and debates, inflation is primarily a monetary phenomenon.
Doing otherwise will not get the most competent policymakers to the table, and it will not promote frank and open discussions. But I draw the line right there. Once policy is set, it should be communicated in clear language to the public. If the central bank is implementing policy by setting interest rates, what are these target interest rates?