Belying the expectations of a rate cut, the monetary policy committee (MPC) has not only decided to keep the rates unchanged in its meeting today but more importantly, has shifted its stance from “accommodative” to “neutral’. This is “to assess the transitory effects of demonetization on inflation and the output gap”. The shift marks a significant … Continue reading Monetary Policy – From "Accommodative" to "Neutral" stance..
Commerce ministry has often lamented that Indian currency is significantly overvalued reducing the competitiveness of Indian exports. This looks contradictory considering the fact that rupee has been depreciating against all major currencies and is down by over 20% against dollar since 2012. However, there is a point in what they say. An attempt to understand … Continue reading Indian Rupee – Is It Appreciating or Depreciating..??
Zimbabwe witnessed unprecedented increase in prices during 2007-09 which could be reined-in only after abandonment of its currency. Like in all earlier episodes, this bout of hyperinflation, was also caused by sharp rise in money supply due to reckless printing of money to finance government deficit. Currency notes issued during this time ranged from Z$ 1 … Continue reading Understanding Hyperinflation – Economy of Zimbabwe..
The MPC (Monetary Policy Committee) decision to cut rate by 25 basis points in its first ever meeting today, also the first under the new governor Dr Urjit Patel, appears not entirely convincing from inflation control perspective. Yet this would bring cheers to both corporate and retail borrowers and hopefully, the clamour for rate cut would … Continue reading RBI rate cut – Is it justified.??
Dr Raghuram Rajan, who demitted office on Saturday leaves behind a rich legacy apart from the huge popularity he enjoyed. Even though he may be remembered as an inflation fighter – something for which he also received maximum flak – his contribution lies equally in financial sector reforms that he pushed through in most of the areas. … Continue reading The Legacy of Raghuram Rajan..
Monthly data on WPI inflation was released today and CPI inflation was released last week. WPI inflation increased to 3.55% in July’16 whereas CPI stood at 6.1%,, marginally above the target set by the government. However, the monthly reading of Inflation appear quite monotonous and doesn’t help understand the longer term trend. Further, it has a … Continue reading CPI, WPI Inflation – Tracking the performance..
RBI released its third Monetary Policy for this financial year today which is also the last under the current governor. This is probably also the last rate setting exercise by the governor since soon, the responsibility for this would shift to Monetary policy committee. (Read more on this – https://indiaeconomyandbusiness.com/2016/05/17/monetary-policy-committee/). The policy has kept the … Continue reading Monetary Policy – The Key Lessons..
- Inflation figures for May’16 released. CPI based inflation rose to 5.76%, second consecutive month of increase after witnessing moderation till March’16 primarily due to increasing food prices. Similarly, WPI based inflation also rose to 0.79%, second month of increase after remaining in the negative zone for more than a year. It may be noted that RBI kept its policy rates constant last week due to fear of rising inflation.
RBI has kept the policy rates unchanged in its second bi-monthly monetary policy for FY17. Two critical elements that have played their part in shaping today’s policy decision are not-yet-arrived monsoon and the sudden surge in April Inflation. I wonder how different the policy statement would have been if the monsoon had arrived by now.. The … Continue reading RBI Policy – So near, Yet so far…
WPI based for the month of April was released last week with inflation showing an increase for the first time after 17 months. The reversal may cause anxiety if this turns out to be the beginning of another upward movement in the inflation cycle. Inflation is a word that every policymaker, and of course, the … Continue reading Explaining Inflation..