Higher interest rate is in the interest or for the sake of public, too...

Not long ago the economists favoured expansionary or inflationary policies, because they believed that it would stoke demand and growth, though without supply side policies response it is likely to increase inflation, which they said is likely to lower value of debt and further increase demand and could increase spending... But they forgot that inflation would lower real wages, incomes and savings and investment too... Nonetheless, we could expect the opposite outcome if they favoured gradual tight or contractionary policies which could increase savings and investment with higher real wages, incomes and profit... Wages are consumed and profits are saved and invested, therefore it is the capitalist who saves money and the increased return on savings and investment is also likely to benefit the capitalist, return on his investment increases... A gradual tight monetary policy and low inflation also increase the value of money and demand... Inflation reduces real wages, incomes and profit and savings/investment and demand and growth while lower prices are likely to increase real wages, incomes and profits and demand, too. A gradual contractionary policy is also likely to increase demand by lowering inflation and increasing real wages, incomes and profits...

The RBI has to manage spending in the economy to maintain price stability and FULL_EMPLOYMENT... The right way to increase spending is to increase the value of money and demand by lowering prices and increase real wages, incomes, profits and returns on investment... A gradual increase in the interest rate and expectations over the long run is needed to increase spending... The price of everything is going up but the price of capital -- read the interest rate -- is going down... The bond yields shall also go up in the long run to increase investment spending, though bond prices move in the opposite direction... For forward guidance the RBI shall notify the bottom and top of prices of financial assets in order to avoid uncertainty...

A gradual lower price expectation by gradual interest rate hike expectations is likely to increase supply and lower prices... A gradual rate hike expectations in the long run is likely to increase investment spending...

Stabilising or increasing spending without stoking inflation and unemployment is the aim and for that the RBI shall increase the value of money by increasing rate hike expectations in a slow manner so that lower price expectations increase supply and lower demand... reinforcing low prices... Higher interest rate on savings would also increase investment demand...

Nobody understands that interest rate hikes are not directly related to stock market investment, but it works with long lags between investment and earnings and perception and expectations about the company... If people could become millionaire and billionaire by investing in stocks of INDIAn companies then think of profits they must be earning... A 40 basis point hike in interest rate is going to do nothing to their investment plans and earnings... While investing earnings and expectations are very important, company that has consistently achieved its estimated earnings and revenue means actual earnings are equal or higher and the estimated earnings and revenue are higher for the next quarter/year...

Gradual rate hikes and expectations from the bottom could help increase investment spending and lower prices expectations could help increase supply and lower or delay demand ...

Higher interest rate is in the interest or for the sake of public, now, it would also lower business cost in a trade-off with the borrowing cost... Higher yields are good for the investors...

High price or inflation expectations could set speculative tendencies as far as investment is concerned, but higher interest rate expectations could lower earnings expectations and prices or inflation which could delay demand and increase supply... This is the time to curb such speculation...

The RBI shall lower inflation in order to make the economy competitive which is likely to increase appreciation expectations and exports... Higher or strong foreign exchange expectations could increase export demand... Strong exchange rate is also likely to lower import bill due to lower price expectations...

Rate hike by the RBI was a preemptive attempt to stop/stabilise foreign exchange outflows due to inflation and depreciation and expectations... Higher yields than the US or the arbitrage between the US and INDIA could stabilise... In the hindsight of inflation and depreciation and expectations, this rate hike seems reasonable... It could lower inflation and depreciation and expectations and could limit foreign exchange outflows from both debt and equity...

Further appreciation of the dollar is possible if the RBI demands too much dollar... Appreciation or lower reserve expectations could be self-fulfilling... INDIA owns debt in its currency and little in foreign exchange... Countries that owe debt in their own currencies do not involve the risk of default... The RBI is also the finance arm of the GOI... If it is necessary monetisation of debt by the RBI is possible...

Economic decision making often involve trade-offs... If the government reduces taxes on oil it would help increase spending and taxes elsewhere... Lower interest rates could further increase investment spending and taxes... Though, it depends upon the tax multiplier...

Vast unorganised sector like agriculture has a lot of disguised unemployment... 50% of the labourforce is seasonally employed by the agri-economy... which needs skilling to provide productive employment…

Like other markets investors could bargain buy or sell price in the market... The investors may choose or bring consensus on a single buy and sell price, highest possible it could go to sell or lowest possible it could go to buy, which is a profit maximisation outcome... Everybody would gain...

If everyone in the stock market set same sell limit order at the highest price for the day, it could soon become a reality. Everybody shall choose same price, for entry lowest and exit highest price... If this could happen everybody would gain... and would also help stabilise the markets...

The real question is that what could happen if everybody expect and set limit at the highest price according to the high price range for the day or if they expect or set limit lowest price according to the low price range for the day, or if everybody set same limit price for buy or sell... what would happen with the actual or current prices...

Everybody shall invest in index funds or mutual funds having nifty 50 and bse 30 companies, they are the top companies and investors does not need thorough research, they could take advantage of others... Investors shall buy significant correction in corrections... Investment mean three things buy low and sell high buy low sell high and buy low and sell high... Investments need timing...

Food inflation is high which could get translated in higher demand for wages that could further increase prices... Modiji shall serve INDIA first, people who have voted for him... He could be in-sensitive for the pain of the Ukrainian people and remain neutral and and show-off by that he cares for other countries people by donating vaccines and exporting wheat... Both, seems inconsistent... All are linked to the Ukrainian invasion... All countries must dislike Russia... It’s a humanitarian issue and all countries shall unfriend Russia...

Like the govt has backed off from farm laws, it has also retreated from CAA and NRC... By bulldogging illegal construction it has indulged in appeasement of its vote bank... The govt must stop illegal immigrations as it could destroy govt flagships and lower employment oppourtunities for the lower class citizens of INDIA...

Expectations Paradigm...

 Academics, theorists and philosophers are always in search of truth that proves to be useful in modeling human theories based on simple assumptions to predict response or outcome of some stimulus, if acted upon, which is the goal of the behavioral economics, a quite novel branch of economics. Expectations have been the one of the concepts that drove a lot of attention in predicting and forecasting the current and future outcome or response. Nonetheless, “expectations are self-fulfilling” which is a universal concept, which applies almost anywhere and everywhere, and especially in psychology and economics.  What you expect and what is your action decides the outcome.

Inflation is a problem as long as the price level does not come down... Higher prices and lower prices both are good for either demand or supply, higher prices mean higher demand and lower supply and lower prices mean higher supply and lower demand... The problem enters when people experience and expect or estimate prices (high/low) and increase speculation and investment based on price expectations, higher price expectations would increase demand and lower or delay supply and lower price expectations increase supply and lower or delay demand, which only could maximise returns, though expectations affect investment and consumption decisions today... If they expect higher prices they increase demand which would increase current prices and if they expect lower prices they increase supply which would lower current prices... To control inflation the govt may think like investors or traders... Create strategic reserves when prices are low to increase supply during high inflation... 

There is another view in the market, too, except the supply side disruption, that the current inflation is high due to low base a year ago, which is also likely to fade as inflation and growth stabilise... The Fed missed the neutral stance by jumping to the restrictive stance in order to stabilise inflation expectations... Since the objective is to balance on the neutral real interest rate... Otherthings remaining constant, if prices or inflation increase it lowers real interest rate, wages and exchange rate which should increase demand and spending... In this state of affairs, if the Fed increases nominal interest rate it would not let the aforesaid mechanism work - as inflation increases the Fed would hike and the real interest rate would remain same... In real terms the situation would remain same, the real rate would remain same... Nonetheless, if higher inflation increases demand (or lower supply), inflation begets more inflation which could be self-fulfilling...

Probably, there is one more reason for lower inflation expectations, is lower (investment and) employment in construction, because it consumes a lot of unskilled labour which creates demand more than any other sector, tightening leads to higher unemployment and lower inflation and expectations... Lower inflation or price expectations would further delay demand and reinforce lower prices...

Stable inflation and interest rate and expectations are important for financial stability, higher inflation means price of everything, including labour, is increasing, it is a problem when real income doesn't increase... Higher prices mean that demand would be in control and stable interest rate means that supply would not be disrupted... Rate hikes and higher unemployment could further reduce supply and reinforce higher prices... Higher prices could help increase supply and restrict demand, rate hikes could further reinforce higher prices and vice versa...

Economic decision making often involve trade-offs... If the government of INDIA reduces taxes on oil it would help increase spending and taxes elsewhere... Lower interest rates could further increase investment spending and taxes... Though, it depends upon the tax multiplier...Until INDIA provides free food and free education and skills upto the secondary level, it would get stuck in low productivity and income like agriculture... Distribution of labour and income according to the aptitude/skills and specialisation is the goal of the economic policy-making...

Rainy season is still away the govt must protect the coal from water to stabilise future supply to the power sector, it must be stored and transported safely and at lower cost... Coal and electricity demand during rain and lower supply could further reinforce higher prices... The govt must be proactive to control supply/demand and prices... The govt must think like a trader... Lower prices now and higher price expectations could increase investment returns by the rainy season... it would also help increase supply during high prices to increase stability...

Everybody shall invest in index funds or mutual funds having nifty 50 and bse 30 companies, they are the top companies and investors does not need thorough research, they could take advantage of others... Investors shall buy significant correction in corrections... Investment mean three things buy low and sell high buy low sell high and buy low and sell high... Investments need timing...

Russian ambitions are worthless, its economy has flared poorly on diversification of production and exports, its oil exports are going to take a hit as EVs could lower oil demand and exports and prices would return to normal...Back to back Corona (from china) and Russian invasion of Ukraine forces to think of some socialist-communist agenda working to derail the global economy... It must have something to do with the oil prices, the US is a net exporter of oil now... During Corona oil prices hit low which hit the US shale companies and investment in it got down, though oil prices have bounced back sharply since then, but not shale production... Investment in oil is done keeping future or expected prices in the mind, but shale could not catch up...