RBI’s counterproductive stop-go policies

The Indian central bank’s ill-fated attempt to stabilise the rupee will come at the expense of macroeconomic stability.
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RBI's stop-go printing press in Mysore
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<div style="text-align: left;"> RBI's stop-go printing press in Mysore </div>

There is a pattern developing among some emerging-market central banks fear of floating.

Central banks in Turkey, Poland and Brazil have all used monetary operations recently, seemingly to prop up their currencies. And, on Monday, the Reserve Bank of India RBI became the latest central bank to join the FX intervention bandwagon after the rupee hit record lows against the dollar.

“The market perception of likely tapering of US quantitative easing has triggered outflows of portfolio investment,” the RBI said. “Consequently, the rupee has depreciated markedly in the last six weeks.”

In a bid to “restore stability to the foreign-exchange market”, the central bank...

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