For years, we believed in the certainty of central bankers, their quiet confidence that the careful setting of short-term interest rates could tame inflation. Yet today, with the uncertain entities of geopolitical volatility and the turmoil of economic pressures, the questions are loud, the answers hesitant, and the rarefied world of central banking feels less certain than ever before.Orthodoxy is not an archaic relic. It is a set of values and practices that have allowed the RBI to remain steady when global finance reeled and when domestic markets convulsed. Orthodoxy gave the RBI an anchor through the Asian financial crisis, the global meltdown of 2008, the pandemic shock, and countless domestic pressures. The conservatism it embodied was wisdom born of understanding that monetary actions reveal their consequences only after time has passed. As Milton Friedman once reminded us, “Monetary actions affect economic conditions only after a lag that is long and variable.” Transmission lags are the unseen threads that connect today’s decisions to tomorrow’s household budgets.
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