How INR Falling Down by US Inflation
By Lakshay Kumar Sharma |On Tuesday, Aug 18, 2022, | 02:40 pm IST
Photo Credit: Investing.com
INR Global Factors are DecliningUS inflation, such as Russian-Ukraine conflicts, tightening of global financial conditions, and soaring crude oil prices, are the main reasons for weakening the INR against US dollars.
Inflation in the US is at its peak right now at 9.1% in the end month of June. This is the highest since 1981 in this country when it was at 8.6%. On Wednesday, the United States Labour Department reported that retail inflation had spiked to 6.2% in October. On Friday, India’s National Statistical Office (NSO) data showed that retail inflation rose to 4.5% for the same month.How INR Falling Down by US Inflation
What is Inflation?
It is a rate that keeps on increasing at the same time. It could be in any product or service. Typically, in India, the inflation rate is calculated on a yearly basis. In other words, if the inflation rate for a particular month is 10%, it means that the prices in that month were 10% more than the prices in the same month a year earlier. If in the same month of the coming year, the inflation rate was to go up to 15%, it implies that something that was priced at Rs 100 in the same month last year and at Rs 110 this year, will be priced at Rs 126.5 next year.
How Does US Inflation is affecting India (INR)?
When the price of any goods or services goes higher globally, it will lead to higher import inflation. In simple words, anything that India or Indian Import will become costlier. But there is a bigger worry. High inflation in the advanced economies, especially the US, will likely force their central banks, especially the Fed, to abandon their loose monetary policy. A tight money policy by the Fed and the rest would imply higher interest rates. That will affect the Indian economy in two broad ways. One, Indian firms trying to raise money outside India will find it costlier to do so. Two, the RBI will have to align its monetary policy at home by raising interest rates domestically.
