On 5-July-2012, In a span of 45 minutes, the European Central Bank and People's Bank of China cut their benchmark borrowing costs and the Bank of England raised the size of its asset-purchase programme. Their actions came two weeks after the US Federal Reserve expanded a programme lengthening the maturity of bonds it holds. US Fed Chairman has indicated that more measures will be taken if needed.
A Rate cut in these economies would lead to cheaper funds - fuelling up price of commodities and assets. No doubt commodity prices have crashed by 20% to 30% be it Gold or oil or iron ore. Though we are not sure why these economies are so agressive in rate cuts, we asume it is primarily to pull up the demand.
But the problem for India is : rising commodity price will keep the inflation higher preventing any possible rate cuts by RBI. No doubt it is going to be TIGHT ROPE WALK
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