It is questionable at best whether high interest rates could help reduce inflation..
FREMONT, CA, US: I think the cut in the policy rate is a good move and could give the economy the stimulus it needs at this point. Besides, it is questionable at best whether high interest rates could help further reduce inflation that was sparked mainly by food price hikes. These were engineered by the government to transfer over Rs300 billion last year from the urban economy to the mainly rural PPP constituency. This not only gave rise to inflation, but the resulting monetary policy starved the urban industrial and service sectors of some much-needed credit and investments.
Riaz Haq
Published in The Express Tribune, October 16th, 2011.
