So if the RBI’s monetary policies are contributing to a credit or asset price bubble that could lead to a systemic meltdown and growth collapse, the RBI will have to resort to corrective monetary policy if macro-prudential policy alternatives are likely to prove ineffective.
The transition to low inflation The period when a high inflation economy moves to low inflation is never an easy one. After years of high inflation, the public’s expectations of inflation have been slow to adjust downwards. As a result, they have been less willing to adjust their interest expectations downwards.