For the past 30 years now, the Bank has practiced what is commonly called “forecast targeting” when making monetary policy decisions.2 Applying this approach, we develop economic projections to assist our current monetary policy decisions, and provide a clear sense of the likely direction, magnitude, and timing of future decisions.
In the month of October, the interaction of global and domestic developments has somewhat tightened the liquidity conditions. Average daily absorption under the liquidity adjustment facility (LAF) amounted to 1.35 lakh crore during the month, down from the average daily absorption of 2.00 lakh crore in September this year. 25. The tightening of liquidity in October is attributed to several factors.