Chief Economic Advisor Warns Supply Shocks Threaten Monetary Policy Effectiveness

<b>Chief Economic Advisor V Anantha Nageswaran</b> stated that monetary policy tools like interest rate adjustments may become less effective in tackling inflation due to frequent supply-side disruptions. Speaking at an event in New Delhi, he emphasized that fiscal and other public policy measures will become crucial because raising interest rates will not solve supply-induced problems and could potentially prove counter-productive. Nageswaran noted that major global central banks have hiked interest rates to rein in soaring prices driven by ongoing geopolitical conflicts such as the Russia-Ukraine war and the West Asia crisis. He added that countries may need to take creative liberties with inflation-targeting frameworks as global supply shocks continue to dominate inflation dynamics.