.....Higher interest rates with a lag affect demand growth negatively, which, in its turn, is expected to impact inflation. However, this linkage is spread out over several quarters and happens to be extremely tentative. This made the current Economic Survey to admit that the linkage between monetary policy instruments and inflation is apparently “slender”. Anyone who has studied the time lag procedure in transmitting the impact of interest rate hike on inflation in India will find it difficult to disagree.........
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