Recently, we witnessed war of words due to change in the base year and its effect of on the GDP rates under different regimes. Nonetheless, the idea of base year is to find a year in which leading macroeconomic indicators growth, inflation and unemployment and others behaved normal... Like after adopting inflation targeting and growth that followed.... We may find that the year 2015 – 16 could be a good point to view inflation in a proper perspective; inflation was low and growth rate close to 8%...
CRR is just one way of increasing liquidity, however, SLR has been cut and RBI is also conducting OMOs... However, the past two rate hikes, without much thought, even with a neutral stance contradict and confused the investors... The inflation target band of 4% +/- 2% is to give the RBI flexibility not to act in haste... if inflation is within the range, it must wait to let the situation (inflation) stabilize following a neutral stance.... Limit is not 4% it is 2 - 6 %....
INDIA offered China to settle exports in yuan, but it declined… China fears that settlement of exports in yuan would increase yuan demand and value, would make yuan strong, which could make it uncompetitive and lower demand for exports... However, it is also concerning that China itself withdraws from accepting yuan, its own currency... How others would take it? That China is not manipulative...
The US has delayed tariffs on Chinese imports by 90 days in hope of a negotiation which shows that the US and China know that tariffs and trade barriers are bad for the investment and economic growth including the stock market... China’s stock market is down much due to trade war and tariff fears and the US is conscious that higher tariffs could increase inflation and interest rate that is likely to affect the stocks in the US...
Ideally (or mathematically) a zero nominal and real interest rate signify that the Fed is neither reinforcing savings nor investment, it is neutral, when it offers less than zero (real interest rate) it means it is inducing investment... The Fed has recently increased real rates above the zero real interest rate after keeping them negative and zero for a long time when growth is high and unemployment and prices are low and stable…
Oil producing countries may try to stabilize prices at levels they see consistent with supply without discouraging demand... They are concerned with slowing global demand; supply cuts and higher prices could further lower demand and price expectations... Lower prices, though, encourage higher demand and price expectations.... especially, the investment demand to sell at higher prices, but not lower price expectations which might delay demand…
Had the OPEC+ delayed supply cuts it could increase lower price expectations based on adaptive expectations… Lower prices increase lower price expectation and vice versa, until intervention… Nonetheless, expectations of supply cuts and higher price expectations have increased the demand for stock or inventory at lower cost or value expectations…
In a market low price means supply has outpaced demand or demand has been low, on the other hand higher prices point supply is low or demand is higher, however to achieve stable prices we need informed decision of future investment or output or prices which is a matter of uncertainty due to inconsistent or stable economic policies based on data, most data are estimates extrapolated on samples which might differ with the population, atleast there is a case, and to the same extant due to global uncertainty…
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