We have to recognize that volatility may be with us for a while and we have to deal with it. However, if the risk of a spiral escalates, reflected in sharp movements in the exchange rate, we will take swift action as and when necessary. Second, domestic liquidity may be showing signs of stress.
Here again, we have the instruments and the willingness to use them, in the context of our distinction between liquidity management and monetary policy. Third, while there are many challenges to managing the growth-inflation dynamics, both external and domestic, they are manageable. Moderating growth will help ease inflationary pressures, which in turn will help growth stabilize.