## Tuesday, July 15, 2008

### The inflation crisis of 2008

I have an article in Financial Express today about diagnosing and addressing the inflation crisis of 2008.

1. Two doubts
1)Energy shock is a major reason for the inflation spiral and noone had anticipated it.So can the central bank analysts being accused of not adopting monetary tightening an year back.
2)Increase in policy rate will have an effect on current scenario with a timelag of 12 to 18 months.So is a montary tightening of the magnitude by u suggested justified (if the impact it will have on inflationary expectations is overlooked)as by that time the scenario could be completely different.

One comment.

Why isn't the appreciating ruppee soltion not yet adopted?What is stoping the central bank from doing that?

2. Ajay, sometime back you argued that the interest rate hikes have come at a wrong time and how it will affect the business environment.

But you have changed your stance.

Would like some more insight into it.

3. Is the monetary tightening and interest rate hike going to affect the growth prospects as such?RBI seems to be threading carefully out their.
Seems like the political unceratininty in the months to come will have a more of a negative impact on growth projections than the monetary tightening.

4. This comment has been removed by the author.

5. This is not related, but this news item had me on the floor laughing my guts out.

http://www.financialexpress.com/news/Inflation-data-to-come-out-on-Thursdays/336484/

What next? Inflation data to come out on Wednesdays?

6. hi,
Today on the death anniversary of my guru Dr I G Patel; Feel like the vision of energy self sufficiency is utmost required.

Inflationary shocks definately are there but the Fiscal and monetory control in an institutional framework can lead us to survive in this inflation crisis of 2008.

abdp76@yahoo.com

7. http://www.imf.org/external/np/vc/2008/072008.htm

8. Does anyone on here know what the UK's current macroeconomic policy is to try and regain control over inflation?
I know the MPC has maintained the bank rate at 5%. But what else is the government doing?

Also how does inflation affect the commercial banking industry, such as NatWest?

Ash

Please note: Comments are moderated. Only civilised conversation is permitted on this blog. Criticising me is perfectly okay; uncivilised language is not. I delete any comment which is spam, has personal attacks against anyone, or uses foul language. I delete any comment which does not contribute to the intellectual discussion about the blog article in question.

Please note: LaTeX mathematics works. This means that if you want to say $10 you have to say \$10.