Few days after Reserve bank of India (RBI) chose not to raise rates, the International Monetary Fund (IMF) has batted for further monetary policy tightening in order to anchor expected rise in inflation.
As per IMF estimates, Indian inflation may surge to 4.7% in 2018-19 from 3.6% in 2017-18, because of accelerating demand along with rising fuel prices. The multilateral agency further pointed that core inflation of India, excluding all food and energy items, had risen to about 6% as a result of a narrowing output gap and pass-through effects of higher energy prices and exchange rate depreciation.
Globally, IMF expects interest rates to rise in advanced economies from the current still-accommodative levels. It also noted that emerging market and developing economies should be prepared for an environment of higher volatility, amid rising trade tensions.