Global palm oil prices escalated due to labour shortage in Malaysia and adverse weather conditions leading to lower than expected production and high export duties on crude palm oil. However, price pressures continued in the domestic market as Malaysia increased its export reference price for July 2021, maintaining its export duty at the highest rate of 8.0 per cent. To control domestic edible oil prices, import duty on crude soybean and sunflower oil were reduced from 15.0 per cent to 7.5 per cent, effective August 20, 2021 and it was further reduced to 2.5 per cent from September 11, 2021. Similarly, import duty on refined soybean and sunflower oils was reduced from 45.0 per cent to 37.5 per cent and further to 32.5 per cent with the same effective dates. To attain self-sufficiency in production of edible oil, the Government announced a National Mission on Edible Oil – Oil Palm (NMEO-OP) with an investment of over ₹11,000 crore and assured farmers access to all facilities, from quality seeds to technology. When the MPC met in August, headline inflation had breached the upper threshold for the second month in succession in June due to strong momentum in the May print running across all the major sub-groups.

The authors conclude that citizens’ response to the virus is important and that the end of formal lockdowns has limited impact on employment. Closures of in-person schools and childcare facilities research park deli have the greatest impact on the labor supply of parents. Childcare demands are likely to impair parents’ ability to return to their previous levels of participation and hours.

Businesses receive more funding and make more, and consumers have more money to spend. The Federal Reserve’s goal is to keep inflation, the measurement of the change in prices, at around 2%—also considered healthy by economists and officials. It also uses monthly economic indicators, such as employment, real personal income, industrial production, and retail sales. The spread of the COVID-19 epidemic and the resulting public health lock-downs in the economy in 2020 are an example of the type of economic shock that can precipitate a recession.

These developments along with continued effective supply management of key food items and easing of international food prices could soften headline inflation by around 50 bps. Conversely, a further hardening of international food prices, demand-supply imbalances in some food items and unseasonal rainfall could exert upward pressure on headline inflation by around 50 bps (Charts I.11b and I.12b). The outlook remains overcast by the future path of the pandemic; the accelerated pace of vaccination and release of pent-up demand provide an upside to the baseline growth path. Headline inflation has fallen back into the tolerance band and the trajectory is expected to be driven by supply-side factors. A faster resolution of supply chain disruptions, good foodgrains production and effective supply management could cause inflation to undershoot the baseline, contingent on the evolution of the pandemic and the efficacy of vaccines. The Phillips curve shows the relationship between inflation and unemployment.

Why is there a trade-off in the economy between unemployment and inflation? So far, the answer is that when unemployment is high in the economy, employees face a high cost of job loss, and employers will be able to get workers to work conscientiously at a lower wage than would be the case when unemployment is lower. The shape of the indifference curves indicates that the central bank is willing to trade higher inflation for lower unemployment at all times. Figure 15.20 illustrates the relationship between the degree of central bank independence in the mid-1980s, and average inflation between 1962 and 1990, across OECD countries.