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Arvind Subramanian vs Urjit Patel: CEA hits out at hawkish RBI, says economic activity remains ‘below potential’
May 12, 2017
- “True core inflation” had declined steadily over the last seven months and was on target to achieve the medium-term inflation target, he noted and asked whether inflation pressures weren’t easing considerably.
- “Going forward, wouldn’t an appreciating exchange rate dampen inflation?” he asked.
- Immediately after demonetisation in November, the dominant view among the analysts and investor community was that the RBI would cut interest rates (there had been a declining trend in inflation since Q2FY17 and the note ban was expected to have a short-term adverse impact on growth), but that was not to be.
- So, real repo rate (nominal rate minus CPI headline inflation) increased between July 2016 and January 2017.