{"id":31636,"date":"2018-10-27T17:01:59","date_gmt":"2018-10-27T11:31:59","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=31636"},"modified":"2018-10-27T17:01:59","modified_gmt":"2018-10-27T11:31:59","slug":"cea-time-to-change-monetary-stance","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/cea-time-to-change-monetary-stance\/","title":{"rendered":"CEA: Time to change monetary stance"},"content":{"rendered":"

CEA: Time to change monetary stance<\/a><\/strong><\/p>\n

Context<\/strong><\/p>\n

Chief Economic Adviser Arvind Subramanian on Monday acknowledged that the country\u2019s monetary authorities may have little choice now but to adopt a policy stance that lets them tamp down on re-emerging inflationary pressures<\/p>\n

On whether RBI should change its stance as inflation is rising<\/strong><\/p>\n

Mr Subramanian said, \u201cNow clearly the cycle has turned, inflationary pressures have re-emerged. So it is not just the fact inflation is picking up but also the fact if growth happens the output gap will also start narrowing. From both those perspective the stance of the monetary policy naturally has to change.\u201d<\/p>\n

Bond yields shot up<\/strong><\/p>\n

Bond yields shot up after the comments with the yield of new 10 year government bond ended the day at 7.44% as compared to its previous close of 7.31%.<\/p>\n

Increase in Consumer price index based inflation<\/strong> – the central bank\u2019s primary yardstick for monetary policy formulation – increased to a 17 month high in December following higher food prices. It was 5.21% in December just below the central bank\u2019s tolerance limit of 6%.<\/p>\n

MPC kept the rates unchanged<\/strong><\/p>\n

The monetary policy committee of RBI has kept the key policy rate or the repo rate unchanged in the last two meetings while keeping the neutral stance. The next review meeting is due next week.<\/p>\n

Markets have misinterpreted the government\u2019s additional borrowing<\/strong><\/p>\n