30 Aug 2017

Monetary news, inflation low

At its August policy review, the Monetary Policy Committee cut policy rates by 25 basis points. This was widely expected given the benign inflation outlook and at 6% it brings rates to their lowest level since October 2010. Economic data have been weak, reflecting the one-off adjustment before GST.  June’s IIP contracted by 0.1%, with contractions of 6.2% in Capital Goods and 6.6% in Consumer Durables. The July Purchasing Managers indices reflected the same slowdown: Service fell to 45.9 and Manufacturing to 47.9. Anecdotal evidence from our channels suggest that “deferred purchases” are driving a recovery already.

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