High prices won’t be the RBI's only reason for a rate hike4 min read 21 Sep 2022, 09:41 PM IST
India, which imports most of its crude oil, is especially at risk of being trapped in inflation-exchange rate loop.
Inflation in India has stayed above the central bank’s upper tolerance limit for eight months now. Yet, when the monetary policy committee (MPC) hikes interest rates next week, rising prices won’t be the only reason. This year, the rupee has lost value both domestically through inflation, and externally through depreciation against the US dollar. The twin factors have complicated the MPC’s task of maintaining financial stability in a volatile global scenario. Let’s unpack.
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