In addressing the fiscal deficit, the 2015 Budget announced in February entails a fiscal package which reduces the expenditure ceiling and raises tax revenue over the next two years. Policymakers are aware that stabilising debt at a sustainable level, while necessary and inevitable, will be challenging in the face of subdued economic growth outcomes. The high current-account deficit is another source of vulnerability.
And in meeting our objective, we support growth and inflation, which in turn creates the conditions for interest rates to “normalise” once more. Of course, the level that rates will return to in the future is dependent upon the degree to which the secular drivers, currently depressing rates, can be reversed.