Thursday, October 31, 2013

RBI’s heady cocktail

.......... In this way, the RBI expects to address inflation as well as back growth. While growth may be supported by credit-financed personal expenditures, it is unclear why the demand this generates would not add to inflationary pressures just because the repo rate is being hiked. Reading between the lines the argument seems to be that this would result in the higher repo rate “anchoring inflation expectations”, whatever that nebulous phrase may imply.

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