In his speech at SAARC Finance Governors’ symposium at Kumarakom in Kerala, he said “having autonomy frees central bank from pressure of responding to short-term developments, deviating from its inflation target and thereby compromising its medium term inflation goals.”
The standard argument for central bank autonomy is that autonomy enhances credibility of the central bank’s inflation management credentials, he said. Subbarao said with central banks assuming increasing responsibility for financial stability, autonomy question has acquired an additional dimension and greater urgency. Subbarao also pointed out that financial stability is not exclusive responsibility of central bank.
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