Chart of the day | India’s negative real policy rate
On the eve of RBI’s monetary policy, let’s have a look at the key rates of various countries
On the eve of the Reserve Bank of India’s (RBI’s) monetary policy statement, we take a look at the key central bank rates of various countries, their consumer price inflation rates and their gross domestic product (GDP) growth rates.
Note that India’s repo rate is well below its consumer price inflation, unlike the policy rates in Indonesia, Brazil or South Korea. In other words, the real policy rate in India is negative. Also note that the gap between the policy rate and inflation in the Philippines is marginal.
India is in the company of Thailand and Taiwan in having negative policy rates. But these are export-dependent economies, and Taiwan’s GDP contracted in the June quarter from the year-ago period. China’s policy rate is the one-year lending rate and is, hence, not comparable with the overnight lending key rates of most other central banks. But China’s overnight money market rate is around 4.3%, much higher than its consumer price inflation.
Indeed, the chart suggests that India is in the company of countries like the US and UK, whose key policy rates are far lower than their inflation rates.
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