Trade and industry have all along been protesting against the monetary policy stance. The recent reduction in the policy rate appears a step of keeping coordination with the international banking system, as most of the central banks, both in developing and developed countries, have recently made marginal reductions in their policy rates. By the way, these days the majority of central banks follow an “inflation targeting” framework for their monetary policy. Such banking coordination is seemingly advised by the IMF as well for the smooth functioning of the international financing system.

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The timing of the marginal reduction in the policy rate is seemingly inappropriate. The inflation rate touched its lowest level, 0.3 per cent, in April 2025. That was the appropriate time to reduce it, while in the last six months it has been on a rising trajectory, as the inflation rate was 6.2 per cent in November 2025. This reversal in the inflationary trend gives strength to the argument that monetary policy is no solution to cost-push inflation without its side effects. Seemingly, Goodhart’s law has worked, as demand contractionary policy has tamed cost-push........

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