RBI's 'impossible trinity' of problems: rupee, inflation, bond yields

As the pandemic took hold, the last few months were tough. But the Reserve Bank of India (RBI) sailed through, almost making it look effortless. It supported the economy in every possible way – rate cuts, liquidity infusions and regulatory easing. In terms of monetary policy, the RBI sought to balance two objectives: Not letting the rupee appreciate in the midst of a pandemic and providing enough liquidity to support a recovery. Luckily, the two were aligned. A shrinking trade deficit and large capital inflows enabled it to buy dollars, build up currency reserves and infuse rupee l.....

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