US inflation hit a three-decade high at 6.2 percent in October, with widespread price increases for everything from groceries to cars due to persistent supply shortages and strong consumer demand.

Share Market Live

NSE

To discuss its impact on Asia and India, CNBC-TV18 spoke to Robert Subbaraman, Head of Global Macro Research at Nomura.

Subbaraman said they expect US CPI inflation to be over 7 percent by February 2022.

He said the big risk for Asian inflation is food prices.

Also Read: GST collection surge in October shows economy on recovery path: MoS Finance

“We are also starting to see some inflationary pressures developing in Asia. So these supply bottlenecks that we are seeing and also commodity prices which are going up a lot are global, it is a global issue and so Asia will be part of it. The area that I am very focused on and could be the big risk for Asian inflation is food prices. Food prices often follow energy prices and food has a very big weight in CPI basket. So that is a risk that we face.”

Speaking about India, he said India is nowhere near full economic recovery. He added that it is very important that RBI utilises its independence and doesn’t fall into the trap of supporting the fiscal deficit with low rates and just focusing on growth.

Also Read: India's economic recovery on track, inflation choking global economy: FinMin report

“The economic recovery is still nowhere near full recovery in India. We have in India a weak fiscal finances because of COVID but India was starting from a weaker position than many other countries and it has quite high public debt now. So the risk to me and the thing to worry about is fiscal dominance. India’s core inflation is already very close to top of RBIs target range and we think it could go higher. So it is very important that RBI utilises its independence and doesn’t fall into the trap of supporting the fiscal deficit with low rates and just focusing on growth. So for me the key thing is that the central bank avoids fiscal dominance, sticks to monetary policy independence and makes sure it tackles inflation.”

Watch video for entire conversation.

(Edited by : Aditi Gautam)

First Published:Nov 12, 2021 10:24 PM IST