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Sticky Inflation

 Context: Recently RBI has refrained from cutting interest rates despite declining retail inflation rates, which have hovered near the 4% mark since September 2023.

 

What is Sticky Inflation?

It’s refers to a situation where inflation rates remain relatively high or stable over time, despite changes in economic conditions or monetary policy. This phenomenon is characterized by a slow decline in inflation rates and resistance to central bank efforts to lower them through measures like interest rate cuts.

Reasons: Rising wages and prices for consumer goods and services are typically the main factors behind inflation stickiness.

Implications: It can push monetary authorities to tighten monetary policy and raise interest rates.

Sticky Inflation
Sticky Inflation

 

 Source: IE