inflation n forex reserve

7/27/2019 Inflation n Forex Reserve

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INFLATION

Inflation is a rise in general level of prices of goods and services over time. Although"inflation" is sometimes used to refer to a rise in the prices of a specific set of goods or

services, a rise in prices of one set (such as food) without a rise in others (such as wages)is not included in the original meaning of the word. Inflation can be thought of as adecrease in the value of the unit of currency. It is measured as the percentage rate ofchange of aprice index[1] but it is not uniquely defined because there are various priceindices that can be used.

Many economists believe that high rates of inflation are caused by high rates of growth ofthe money supply.[2] Views on the factors that determine moderate rates of inflation aremore varied: changes in inflation are sometimes attributed to fluctuations in realdemandfor goods and services or in available supplies (i.e. changes in scarcity), and sometimes tochanges in the supply or demand for money. In the mid-twentieth century, two camps

disagreed strongly on the main causes of inflation at moderate rates: the "monetarists"argued that money supply dominated all other factors in determining inflation, while"Keynesians" argued that real demand was often more important than changes in themoney supply.

There are many measures of inflation. For example, different price indices can be used tomeasure changes in prices that affect different people. Two widely known indices forwhich inflation rates are reported in many countries are theConsumer Price Index (CPI),which measures consumer prices, and the GDP deflator, which measures price variationsassociated with domestic production of goods and services.

Related definitions

Related economic concepts include: deflation, a general falling in price level;disinflation, a decrease in the rate of inflation; hyperinflation, an out-of-controlinflationary spiral; stagflation, a combination of inflation and slow economic growth and
http://en.wikipedia.org/wiki/Price_levelhttp://en.wikipedia.org/wiki/Price_indexhttp://en.wikipedia.org/wiki/Inflation#cite_note-0%23cite_note-0http://en.wikipedia.org/wiki/Inflation#cite_note-0%23cite_note-0http://en.wikipedia.org/wiki/Money_supplyhttp://en.wikipedia.org/wiki/Money_supplyhttp://en.wikipedia.org/wiki/Inflation#cite_note-1%23cite_note-1http://en.wikipedia.org/wiki/Real_versus_nominal_valuehttp://en.wikipedia.org/wiki/Demandhttp://en.wikipedia.org/wiki/Scarcityhttp://en.wikipedia.org/wiki/Monetaristhttp://en.wikipedia.org/wiki/Keynesianhttp://en.wikipedia.org/wiki/Consumer_Price_Indexhttp://en.wikipedia.org/wiki/Consumer_Price_Indexhttp://en.wikipedia.org/wiki/GDP_deflatorhttp://en.wikipedia.org/wiki/Deflation_(economics)http://en.wikipedia.org/wiki/Deflation_(economics)http://en.wikipedia.org/wiki/Disinflationhttp://en.wikipedia.org/wiki/Hyperinflationhttp://en.wikipedia.org/wiki/Stagflationhttp://en.wikipedia.org/wiki/Price_levelhttp://en.wikipedia.org/wiki/Price_indexhttp://en.wikipedia.org/wiki/Inflation#cite_note-0%23cite_note-0http://en.wikipedia.org/wiki/Money_supplyhttp://en.wikipedia.org/wiki/Inflation#cite_note-1%23cite_note-1http://en.wikipedia.org/wiki/Real_versus_nominal_valuehttp://en.wikipedia.org/wiki/Demandhttp://en.wikipedia.org/wiki/Scarcityhttp://en.wikipedia.org/wiki/Monetaristhttp://en.wikipedia.org/wiki/Keynesianhttp://en.wikipedia.org/wiki/Consumer_Price_Indexhttp://en.wikipedia.org/wiki/GDP_deflatorhttp://en.wikipedia.org/wiki/Deflation_(economics)http://en.wikipedia.org/wiki/Disinflationhttp://en.wikipedia.org/wiki/Hyperinflationhttp://en.wikipedia.org/wiki/Stagflation


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rising unemployment; and reflation, which is an attempt to raise prices to counteractdeflationary pressures.

In classicalpolitical economy, inflation meant increasing the money supply, whiledeflation meant decreasing it (seeMonetary inflation). Economists from some schools of

economic thought (including some Austrian economists) still retain this usage. Incontemporary economic terminology, these would usually be referred to as expansionaryand contractionary monetary policies.

Measures of inflation

Inflation is measured by calculating the percentage rate of change of a price index, whichis called the inflation rate. This rate can be calculated for many differentprice indices,including:

Consumer price indices (CPIs) which measure the price of a selection of goods

purchased by a "typical consumer." In the UK, an alternative index called theRetail Price Index (RPI)uses a slightly different market basket.

Cost-of-living indices (COLI) are indices similar to the CPI which are often used

to adjust fixed incomes and contractual incomes to maintain the real value ofthose incomes.

Producer price indices (PPIs) which measure the prices received by producers.

This differs from the CPI in that price subsidization, profits, and taxes may causethe amount received by the producer to differ from what the consumer paid. Thereis also typically a delay between an increase in the PPI and any resulting increasein the CPI. Producer price inflation measures the pressure being put on producersby the costs of their raw materials. This could be "passed on" as consumer

inflation, or it could be absorbed by profits, or offset by increasing productivity.In India and the United States, an earlier version of the PPI was called theWholesale Price Index.

Commodity price indices, which measure the price of a selection of

commodities. In the present commodity price indices are weighted by the relativeimportance of the components to the "all in" cost of an employee.

The GDP Deflator is a measure of the price of all the goods and services

included in Gross Domestic Product (GDP). The US Commerce Departmentpublishes a deflator series for US GDP, defined as its nominal GDP measuredivided by its real GDP measure.

Capital goods price Index, although so far no attempt at building such an index

has been made, several economists have recently pointed out the necessity ofmeasuring capital goods inflation (inflation in the price of stocks, real estate, andother assets) separately.[citation needed] Indeed a given increase in the supply of moneycan lead to a rise in inflation (consumption goods inflation) and or to a rise incapital goods price inflation. The growth in money supply has remained fairlyconstant through since the 1970s however consumption goods price inflation hasbeen reduced because most of the inflation has happened in the capital goodsprices.
http://en.wikipedia.org/wiki/Reflationhttp://en.wikipedia.org/wiki/Political_economyhttp://en.wikipedia.org/wiki/Monetary_inflationhttp://en.wikipedia.org/wiki/Austrian_school_of_economicshttp://en.wikipedia.org/wiki/Inflation_ratehttp://en.wikipedia.org/wiki/Price_indexhttp://en.wikipedia.org/wiki/Consumer_price_indexhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Retail_price_index_(united_kingdom)http://en.wikipedia.org/wiki/Retail_price_index_(united_kingdom)http://en.wikipedia.org/wiki/Cost-of-living_indexhttp://en.wikipedia.org/wiki/Real_versus_nominal_valuehttp://en.wikipedia.org/wiki/Producer_price_indexhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Wholesale_price_indexhttp://en.wikipedia.org/wiki/Commodity_price_indexhttp://en.wikipedia.org/wiki/GDP_Deflatorhttp://en.wikipedia.org/wiki/Gross_Domestic_Producthttp://en.wikipedia.org/w/index.php?title=Capital_goods_price_Index&action=edit&redlink=1http://en.wikipedia.org/wiki/Capital_goodshttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Reflationhttp://en.wikipedia.org/wiki/Political_economyhttp://en.wikipedia.org/wiki/Monetary_inflationhttp://en.wikipedia.org/wiki/Austrian_school_of_economicshttp://en.wikipedia.org/wiki/Inflation_ratehttp://en.wikipedia.org/wiki/Price_indexhttp://en.wikipedia.org/wiki/Consumer_price_indexhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Retail_price_index_(united_kingdom)http://en.wikipedia.org/wiki/Cost-of-living_indexhttp://en.wikipedia.org/wiki/Real_versus_nominal_valuehttp://en.wikipedia.org/wiki/Producer_price_indexhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Wholesale_price_indexhttp://en.wikipedia.org/wiki/Commodity_price_indexhttp://en.wikipedia.org/wiki/GDP_Deflatorhttp://en.wikipedia.org/wiki/Gross_Domestic_Producthttp://en.wikipedia.org/w/index.php?title=Capital_goods_price_Index&action=edit&redlink=1http://en.wikipedia.org/wiki/Capital_goodshttp://en.wikipedia.org/wiki/Wikipedia:Citation_needed


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Foreign exchange reserves

Foreign exchange reserves (also called Forex reserves) ina strict sense are only the foreign currency deposits held by central banks and monetary

authorities. However, the term in popular usage commonly includes foreign exchangeand gold, SDRs and IMF reserve positions. This broader figure is more readily available,but it is more accurately termed official reserves orinternational reserves. These areassets of the central bankheld in different reserve currencies, such as thedollar,euro andyen, and used to back its liabilities, e.g. the local currency issued, and the variousbankreservesdepositedwith the central bank, by the governmentorfinancial institutions.
http://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Goldhttp://en.wikipedia.org/wiki/Special_Drawing_Rightshttp://en.wikipedia.org/wiki/IMFhttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Reserve_currencyhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Eurohttp://en.wikipedia.org/wiki/Eurohttp://en.wikipedia.org/wiki/Yenhttp://en.wikipedia.org/wiki/Bank_reserveshttp://en.wikipedia.org/wiki/Bank_reserveshttp://en.wikipedia.org/wiki/Bank_reserveshttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Financial_institutionshttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Goldhttp://en.wikipedia.org/wiki/Special_Drawing_Rightshttp://en.wikipedia.org/wiki/IMFhttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Reserve_currencyhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Eurohttp://en.wikipedia.org/wiki/Yenhttp://en.wikipedia.org/wiki/Bank_reserveshttp://en.wikipedia.org/wiki/Bank_reserveshttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Financial_institutions


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Forex reserves up $1.8 bn to $312 bn

June 28, 2008 01:55 IST

Indian foreign exchange reserves rose by $1.8 billion in the week ended June20, 2008, to $312.48 billion.

The increase in reserves was basically due to a hike in foreign currencyassets, which grew by $1.78 billion to $302.74 billion, according to the

Reserve Bank of India's weekly statistical supplement released.

The forex reserves had dipped by $4.96 billion in the week ended June 13,2008, after rising to a record $312.481 billion by the end of May. The forexkitty has grown by just $2.75 billion since March 2008.

The decline in reserves has been attributed to dollar sales by the central bankto keep the value of the rupee below 43 to dollar, analysts said.

RBI has been intervening in the forex market for the past couple of weeks toprovide some relief to the depreciating rupee.

Crude oil prices today touched a new high of $142 a barrel. This entailshigher payment for buying crude oil from the international market.Meanwhile, inflation touched its new peak in 13 years at 11.42 per cent onthe wholesale price index on June 13, 2008.


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RBI recent data

Foreign Exchange Reserves

Variation over

Item As on Jun. 27,2008

Week End-March2008

End-December2007

Year

Rs.Crore

US$Mn.

Rs.Crore

US$Mn.

Rs.Crore

US$Mn.

Rs.Crore

US$Mn.

Rs.Crore

USMn

1 2 3 4 5 6 7 8 9 10 11

Total Reserves 13,33,962 311,7908,418 691 95,997 2,067 2,48,942 36,474 4,64,021 98,3

(a) ForeignCurrency

Assets

12,92,470 302,0508,420694* 96,447 2,820 2,41,985 35,497 4,52,557 95,9

(b) Gold 39,190 9,202 934 837 6,371 874 11,043 2,2

(c) SDRs 47 11 27 8 34 8 41

(d) ReservePosition inthe IMF**

2,255 527 2 3 511 91 552 95 380

* : Foreign currency assets expressed in US dollar terms include the effect ofappreciation/depreciation ofnon-US currencies (such as Euro, Sterling, Yen) held in reserves.For details, please refer to the Current Statistics section of the RBI Bulletin.** : Reserve Position in the International Monetary Fund (IMF), i.e.,Reserve Tranche Position (RTP) which was shown as a memo item from May 23, 2003 to March


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26, 2004has been included in the reserves from the week ended April 2, 2004 in keeping with theinternational best practice.

Current foreign ex turnover data canbe obtained from.

http://www.rbi.org.in/scripts/Statistics.

aspx
http://www.rbi.org.in/scripts/Statistics.aspxhttp://www.rbi.org.in/scripts/Statistics.aspxhttp://www.rbi.org.in/scripts/Statistics.aspxhttp://www.rbi.org.in/scripts/Statistics.aspx

inflation n forex reserve

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