On the other hand, monetary policy under changing circumstances must give proof of sufficient sensitivity in order to keep inflation expectations firmly anchored to price stability. The main reason for the non-reliance on mechanistic rules in making interest rate decisions is the difficulty of interpreting the economic situation. Monetary policy theory and also practical decisionmaking necessarily operate on the basis of highly abstract concepts.
Fourthly, international experience, especially with Turkey, where conditions are similar, has shown that liberal imports and organised trade in gold benefits the economy, including the external sector. Also, our neighbours in the SAARC region have liberalised and officialised gold imports at nominal duties. These developments make it imperative that we review our policies urgently.