US bond yields have already spiked on concerns about higher inflation as the labour market tightens. The key shift in US macroeconomic strategy—towards a combination of fiscal expansion plus monetary tightening—will complicate matters in the global economy. It does not take much for India to shift towards fiscal profligacy combined with loose monetary policy even as inflation rises. The Narendra Modi government has done well to focus on macro stability in its first four years—undoubtedly helped by the decline in global oil prices after 2014. Will the monetary policy committee go for a rate hike this week?

Source: Mint February 05, 2018 17:48 UTC