Self-Fulfilling, Interest Cost Inflation...

Inflation and expectations increase cost expectations through higher wage and capital costs which means less supply, higher unemployment, lower consumption, and forced savings through higher interest rate, not natural, and lower investment, forced too, and demand supply price and growth and expectations...

Nonetheless, disinflation or little deflation and expectations might help improve the budgets…

Otherthings remaining constant, lower prices would help increase demand price supply and growth which could also be gained through lower borrowing cost and commodity prices when wages are sticky in the short-run…

There are evidences of lower nominal downward wage rigidity (LNDWR)…

But there is no real downward wage rigidity (LRDWR) since there has been a trend to lower real wages, interest and exchange rate through higher inflation and more supply and lower demand relatively and lower price level… which reduces consumption, savings and investment and growth expectations…

The economy reverts automatically in the reverse direction on the back of expectations (Milton Friedman) like a catapult…

However, to increase inflation it is important to increase demand by increasing real wages, interest rate and the exchange rate through higher productivity or lower cost and prices… 

  

The Fed is waiting for productivity, lower prices and higher nominal and real wages, too, to build but if it increases nominal interest rate it would also increase real interest, thereby reducing productivity and competitiveness gains...

There is a difference in voluntary savings and forced savings like voluntary unemployment, higher labour savings, and unemployment, involuntary unemployment, forced labour saving, due to higher interest rates...

The RBI's job (too) is to ensure price stability, higher savings and lower interest rate, higher investment/employment and growth, not higher interest rate and savings and lower investment and employment, and higher prices... and lower supply...

The GOI might tax 1 rupee, per person in the family, perday, inflation cess to dump food items where there is too much private stockholding...

However, there is also a price stabilization fund set up under past budget of Rs 500 Crore…

Nevertheless, if we increase inflation cess as per the above said it would add around Rs 1 billion per day or Rs 100 Crore everyday, enough to increase supply and reduce inflation in food…

Low credit penetration dependent on traditional money lenders, at higher rates, is also responsible for farmers’ suicide which has depressed demand and growth expectations...