Second Quarter Review of Monetary Policy 2010-11
-Announced on the 2nd November 2010
I. The State of the Economy
6. In its World Economic Outlook released in October 2010, the IMF revised upwards its forecast for global growth for 2010 from 4.6 per cent to 4.8 per cent. However, the estimate for the second half of the year is significantly lower than for the first. Moreover, the growth process remains uneven being driven largely by emerging and developing countries. In advanced economies, the recovery continues to be fragile as private demand has not picked up sufficiently to offset the waning fiscal stimulus.
7. In the US, growth remained sluggish in the third quarter of 2010. Household spending is constrained by high unemployment, modest income growth, lower housing wealth and tight credit. The economic recovery in Japan has also moderated recently as reflected in slowdown in industrial production and growth in exports. On the other hand, economic activity in the Euro area is showing signs of resilience in the aftermath of the sovereign debt problems in May-June 2010, though at an uneven pace across the region. Growth in the EMEs continues to be strong, led mainly by domestic demand but supported by exports.
8. Inflation rates in advanced economies remain subdued due to high level of slack in resource utilisation and high unemployment. In the US and Japan, inflation rates are significantly below desired levels providing a rationale for central banks to provide further stimulus through quantitative easing. In sharp contrast, EMEs are witnessing rising domestic demand which is beginning to generate inflationary pressures. These could be aggravated by significant increases in commodity prices driven by investment flows into these markets. Inflation is a growing concern in several EMEs.
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Second Quarter Review of Monetary Policy 2010-11 ... click here
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