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Monday, December 23, 2024 | 10:37 AM ISTEN Hindi

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RBI should raise rates more to fulfil inflation mandate, regain credibility

Higher interest rates may complicate the financing of a record $200 billion government borrowing programme, bigger than even in the first year of the pandemic.

Photo: Bloomberg
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Photo: Bloomberg

Andy Mukherjee | Bloomberg
In trying to squeeze one last drop of output from an empty barrel of monetary elixir, India’s central bank made the serious mistake of not only ignoring the country’s inflation buildup, but pretending that it didn’t exist. Now that the Reserve Bank of India has surprised the market with an unscheduled, 40 basis point increase in the benchmark rate, the journey to recoup its lost credibility is finally under way. Chances are, it will be a hard slog. While the tightening campaign is unavoidable, the longer it goes on, the more it will annoy politicians. 

Even the U.S. Federal Reserve

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