Features of the monetary policy of central banks to combat high inflation

The article describes the measures taken by the central banks of the world's largest economies to combat high inflation. The authors give a definition of what exactly is considered high inflation, analyze the timeliness and effectiveness of taking anti-inflationary measures, and also answer the question of the need for the monetary authorities to react to inflation, which does not have an obvious monetary nature. In the article the particular attention is paid to the difference between the anti-inflationary policy of central banks in developed and emerging markets, as well as to the issues of coordination between the actions of the central bank and the government in the field of anti-inflationary policy. The authors point out the importance of increasing the efficiency of the transmission mechanism through the development of various segments of the financial market, including the derivatives market. As a result of the study, a hypothesis is put forward that there is a direct relationship between the development of the financial market, especially the capital market, and the costs of fighting inflation. Countries with less developed capital markets and smaller gold and foreign exchange reserves are forced to use the key rate of central banks to fight inflation, paying with their economic growth potential for the opportunity to have low inflation. The article also makes a fundamental conclusion that the risk of inflation has acquired global features, however has not yet affected all countries, bypassing those markets that traditionally struggled with the deflation factor, and their central banks had negative rates. As well, the article pays attention to the dependence of the foreign exchange rate on the difference between the levels of interest rates, and makes assumptions about the possibility of manipulating the foreign exchange rate through delaying anti-inflationary measures in order to stimulate exports.

Monetary policy framework in India.

In 2016, the monetary policy framework moved towards flexible inflation targeting and a six member Monetary Policy Committee (MPC) was constituted for setting the policy rate. With this step towards modernization of the monetary policy process, India joined the set of countries that have adopted inflation targeting as their monetary policy framework. The Consumer Price Index (CPI combined) inflation target was set by the Government of India at 4% with ± 2% tolerance band for the period from August 5, 2016 to March 31, 2021. In this backdrop, the paper reviews the evolution of monetary policy frameworks in India since the mid-1980s. It also describes the monetary policy transmission process and its limitations in terms of lags and rigidities. It highlights the importance of unconventional monetary policy measures in supplementing conventional tools especially during the easing cycle. Further, it examines the voting pattern of the MPC in India and compares this with that of various developed and emerging economies. The synchronization of cuts in the policy rate by MPCs of various countries during the global slowdown in 2019 and the COVID-19 pandemic in the early 2020s is also analysed.