Has the #RBI ever given thought to their forward-looking statements?
#psychology #behaviorialfinance
Thread below:👇🏼
1/ The moment ppl hear that rates are going to be higher or increase over time, those intending to take loans, will be pushed into taking them sooner, pushing prices up further. (mostly applicable to large durables/consumer goods cars/housing)
2/ Sellers/companies also jack up prices.
Make hay while the sun shines, so to speak.
3/ Since inflation is already kicking in, the borrower is thinking that this currency will be worth less, so they decide to go out, purchase and pay with depreciate currency.
4/ And so inflation goes up further. Add to that external factors and you're in a vicious cycle.
5/ Inflation can be affected by currency (USDINR) & OIL, as well as increase in demand, not just reduction in supply.