Consumer price inflation increased to 5.8% in June, from a recent trough at 3.7% in August last year, in tandem with a rise in food price inflation. While markedly higher inflation for some time would test the credibility and effectiveness of monetary policy and effectiveness, we expect that continuity in the broad monetary policy framework will foster continued moderate inflation in the medium term. The level and degree of volatility in inflation provide indications of the credibility and effectiveness of monetary policy. Monetary policy and inflation shape sovereign credit profiles in various ways, including by influencing macroeconomic stability. One relevant channel for India’s sovereign credit profile is monetary policy credibility and effectiveness.

Source: Mint August 02, 2016 19:07 UTC