Fed Policy Stance May Fan Inflation, India Central Bank Says

The Federal Reserve’s decision to keep record-low interest rates and the possibility of further steps to spur the U.S. economy may stoke commodity prices and fan inflation in India, the Asian nation’s central bank said.

“Given the fiscal limitations and growing signs of weakness in the U.S., the Fed has already indicated that it will pursue its near-zero rate policy at least till mid-2013,” the Reserve Bank of India said in a report in Mumbai yesterday. “It has also hinted at another dose of quantitative easing. This policy stance may keep the commodity prices elevated.”