Supply shocks to weaken monetary policy effectiveness: CEA
Economic Times 43 min ago·13 Nov 2026, 9:56 am
Chief Economic Advisor V Anantha Nageswaran has warned that standard monetary policy tools like interest rate hikes are becoming less effective in controlling inflation. This is largely due to persistent supply chain disruptions that are driving up prices independently of demand. Consequently, the government's fiscal policy is expected to play a more critical role in stabilizing the economy by addressing these supply-side bottlenecks directly.
For investors, this shift implies that central banks may face a tougher time taming inflation through rate hikes alone. The dominance of supply shocks suggests that price pressures could remain sticky for longer than anticipated. Investors should therefore monitor how fiscal measures are deployed to support the economy and keep a close watch on central bank statements for any changes in their policy outlook.
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