Monday, September 19, 2011

RBI mid-quarter review: the preoccupation with inflation

...Monetary policy operates with a lag. Hence, a premature withdrawal of monetary tightening will be counter-productive and harden inflation expectations. The mid-quarter policy statement does not give a clue as to when the monetary tightening will begin to be phased out. Evidently the central bank will wait for a reversal in the inflation trajectory. Global developments will, of course, play a part......

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