InvestorQ : What does the US inflation at 7.5% really mean for India and RBI?
Lavanya Subramanian made post

What does the US inflation at 7.5% really mean for India and RBI?

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Anamika Sodhani answered.
3 months ago
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Jan-22 US inflation at 7.5% is the highest since the Volcker era. Inflation in the US is largely supply driven and prices are rising not because of surge in demand but output is not able to keep pace. Most of the inflation spike has been back-ended and concentrated in the last 4 months starting from October 2021 onwards.

This will have implications for RBI policy too. It is true that the gap between inflation and Fed rates is very high in the US, as opposed to India. But that may not really matter once the Fed starts hiking rates. When rates are hiked by the Fed, two things happen. Firstly, the US dollar strengthens and secondly there is a major risk-off flow that gravitates towards the US. RBI has been relatively smug, but April policy may see more pressure on RBI.

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