RBI More Concerned With Inflation Than Demonetization

Economists may be have fretted over how demonetization would hit India’s economic growth, but the subcontinent’s central bank is focused more on its old foe, inflation.

The Reserve Bank of India on Wednesday kept interest rates on hold at its policy meeting on Wednesday. That surprised the market, which had leaned heavily toward expecting a cut, in part because the government’s cash curbs had weighed on economic growth.

The demonetization program, which started in November, removed 86 percent of India’s currency in circulation by recalling existing 500 ($7.47) and 1,000 ($14.93) rupee notes and later gradually replacing them with newly printed 500 and 2,000 rupee notes.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.