Why would a Reuters reporter say that 7.75% overnight repo from India’s Central bank is “low-cost”?

Because it is, except you’d have to know that inflation in India is running about 7%… mentioned nowhere in the article…

Having become accustomed to unlimited low-cost cash, the shift to market-based funding has led to some volatility as banks adjust to the new environment.The Mumbai Inter-Bank Offer Rate, or MIBOR, an overnight rate that determines the pricing of short-term debt such as commercial paper, is moving in a range of about 100 basis points, compared with 10 to 20 basis points in mid-July.Last week, MIBOR was at 8.80 percent, higher than even the 8.75 percent the RBI charges for emergency funding. But bankers acknowledge the long-term benefits of creating a yield curve.

via The End of Easy Money – India Pushes to Develop Money Markets – NYTimes.com.

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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