On Wednesday, the Federal Reserve raised its target interest rate by three-quarters of a percentage point to combat a disruptive rise in inflation, while also forecasting a weakening economy and growing unemployment in the months ahead.
The rate boost was the biggest by the Federal Reserve since 1994, and it came after recent data indicated little headway in the country’s inflation fight.
Seth added that all monetary authorities are wrestling with the issue of price rise and taking steps to control it. The impact of a US Fed rate hike is unlikely to be adverse because the RBI has already taken precautions.
On inflation measures, central banks are moving in tandem. Coordination between the RBI and the Finance Ministry has a reasonable impact on inflation measures.
In terms of inflation, if the monetary and fiscal authorities deem it necessary measures will be deployed for macroeconomic management. Food is substantially less in WI, with manufactured goods accounting for the majority of the weight.
High crude oil prices along with rising commodities have led to the current bout of inflation being imported. The RBI has raised its inflation projection to 6.7 per cent for the current fiscal based on Indian basket of crude oil at $105 a barrel.
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