India Inflation 11%! What is happening

Reuters India, points that the India's inflation in june is above 10%, considering the increase of the fuel price, inflation is expected to move to 11%. To ease the inflation, RBI take the stance of tightening the monetary policy, this will ease the pressure on the inflation.

G20 Nations
Among the G20 nations India's RBI takes a tough stands on raising key rates, may be because the india is one of the country has the highest inflation (double digit) among others (even compared to other developed countries).

Key Rate Raise
RBI raised the key interest rates 4th time this year and said they will take 'baby steps' to raise key rates than a huge leap at once. It means RBI will raise key rates in coming months.

Concern
Because of inflation, a bigger worry, however, is that growing risk aversion would keep foreign investors out of India, slowing capital inflows needed to fund the nation's widening current account deficit.

Will home, auto loans rates rise?
Eventhough the RBI said, the key rates rise is to curb the inflation, I could see (to my limited knowledge) there is a possibility of raise in home and auto loans in near future. The goverments and banks say they look for alternative measures instead of raising interest rate they are also considering serious of implication on economy.

Note
A point to be noted is, through out the history, the goverments use to underestimate the inflation. If we have correct statistics, we might have the actual inflation around 20%.

How does monetary policy affect inflation?
Wages and prices will begin to rise at faster rates if monetary policy stimulates aggregate demand enough to push labor and capital markets beyond their long-run capacities. In fact, a monetary policy that persistently attempts to keep short-term real rates low will lead eventually to higher inflation and higher nominal interest rates, with no permanent increases in the growth of output or decreases in unemployment. As noted earlier, in the long run, output and employment cannot be set by monetary policy. In other words, while there is a trade-off between higher inflation and lower unemployment in the short run, the trade-off disappears in the long run.

Policy also affects inflation directly through people's expectations about future inflation. For example, suppose the Fed eases monetary policy. If consumers and businesspeople figure that will mean higher inflation in the future, they'll ask for bigger increases in wages and prices. That in itself will raise inflation without big changes in employment and output.