According to an article on cnbc.com, the Reserve Bank of India (RBI) was expected to lower its target interest rate at its early 2017 monetary policy meeting, but instead the RBI held its target constant. RBI Governor Urjit Patel “pointed to concerns that a ‘fire sale’ in perishable foods was distorting what could be a worrying outlook for inflation.”
a. What is a “fire sale” in perishable foods, and why would it distort the outlook for inflation?
b. If the RBI ignored the fire sale in perishable foods, how might it be led to set the target interest rate at the .wrong level?