I think this is a very good move by the central bank as it's anticipating the continued risk to inflation from higher oil prices and subsidies. |
If they are going to run a higher deficit, then they will have to resort to higher borrowings, pushing up interest rates and fueling inflation. Whenever there's inflation, spending on manufactured goods comes down. |
Most investors are cautious and still have some concerns that there could be return to hostilities. |
New projects could be put on hold, especially now with the peace process under pressure. |
The escalation of violence could be sufficient to slow down the economy's momentum. If there's full-scale war, it will increase the country's risk profile, further fuel inflation, and hit the currency and aid flows. |
The government may find it difficult to bring in investment in the current scenario, so the growth impetus may need to come instead from keeping rates steady. |
The talks are very important for the market because the economic development of the country depends on the outcome. If the country is dragged into a war it's going to be a real problem for us. |