Global Economic Scenario
The last twelve months have been quite unprecedented in terms of volatility and absolute levels of interest rates. The bond market was whipsawed by events in Europe and Washington. Greece was the poster child for the debt crisis in Europe but it was merely the first country to feel the wrath of the capital markets. Portugal, Ireland, Spain, and ultimately Italy experienced difficulty accessing the cash markets to roll over debt. As the European debt crisis worsened, investors flocked to the US.
Domestic Economic Scenario
The inflation based on the Wholesale Price Index fell to 9.11% for the month of November’11 against 9.73% % in October’11. The inflation rates for Primary Articles, Fuel and Manufactured Products were at 8.53%, 15.48% and 7.70% respectively in November 11. The inflation rate for food items was at 8.54%.
Perspective on Markets
Inflation is likely to ease from January 12 onwards due to positive base effect and decline in commodity prices. The fall in crude and commodity prices was partially off-set by the sharp fall in the value of the Rupee. We expect the monetary policy to be in a state of pause till the end of FY12.