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The U.S. Federal Reserve announced on Dec. 13, 2016, that it would increase its benchmark short term interest rate by 0.25 percentage point, to between 0.50% and 0.75%. The increase will also be reflected in business and household borrowing costs. The Fed also announced its intention to make 0.75% percentage point increase in 2017, possibly in 3 quarter percentage point moves. The Fed's forecast is for the fed-funds rate to reach 2.1% at the end of 2018, and 2.9% at the end of 2019. The Fed's policy is based on a sense of strong labor market with unemployment falling, and says it is based on discussion at a 2 day meeting, and "in view of realized and expected labor-market conditions and inflation." This reflects a view that there is now not that much slack in the labor market, that further improvements could trigger higher inflation. Fed forecasts for inflation are for it to increase from 1.5% in 2016 to 1.9% in 2017 and to the target of 2% in 2018. The unemployment rate of 4.6% in 2016 is forecast to go to 4.5% in 2017 and remain at that level till 2019. Economic growth is forecast at a median annual rate of 1.9% in 2016, 2.1% in 2017, only a slight improvement from last forecast in Sept. 2016. Support for chairwoman Yellen's policy decision was unanimous. See the link on views of NYT's Binyamin Applebaum and Neil Irwin on how Fed rate policy and economic growth under the Trump administration is likely to play out, and Ian Talley's report on impact on exports with a stronger dollar in WSJ. These views also are in line with the Fed's forecasts and policy decision as they reflect the concerns of the Fed about inflation, and also reflect the Fed's view that growth will be close to 2% in 2017-2019, and not the 3-4% stated by Trump and Treasury Secretary Mnuchin. Fed rate policies to keep inflation at about 2% tend to counter stimulus spending by the Trump administration and effect of tax cuts. The size of the stimulus and the tax cuts are also likely to be much smaller than stated because of Republican concerns about the deficit in the U.S. Congress, according to these views. The stronger dollar also has the paradoxical effect of making trade gains more difficult while increasing trade friction in tougher bargaining supported by Trump, making the higher growth targets harder to reach.   ...

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The Reserve Bank of India Governor Raghuram Rajan cut the overnight lending rate by one quarter percentage point to 7.25% on June 2, 2015.

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The Congress party leads with 100 seats in Rajasthan and 114 seats in Madhya Pradesh in the State Assembly elections.

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Raghuram Rajan warns about the difficulty of central bankers worldwide to escape from the scenario of ultra low interest rates.

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Narendra Modi is now the choice of the BJP party in India to lead it against the ruling Congress party of Sonia and Rahul Gandhi. The corruption in government and the slowing growth have improved the chances of Modi, the chief minister of Gujarat state in northwestern India, near Mumbai. Modi has done well in Gujarat state in a number of areas- from foreign investment in manufacturing, infrastructure development, and better governance. His plan is to replicate this at the national level. His slogan is minimum government and maximum governance.

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The influence of regional political parties in India continues as the Congress party depends on the Samajwadi party in Uttar Pradesh led by Mulam Singh Yadav for its majority in parliament in 2013. This follows the withdrawal of support first of the party of Mamta Banerjee in West Bengal in 2012 on retail foreign investment issue, and the withdrawal of support of the DMK party in Tamilnadu state over the Sri Lankan issue in 2013. Not only are the regional political parties based in a particular state, they are also dominated by political personalities, such as that of Yadav in Uttar Pradesh (UP), Banerjee in W. Bengal, and Karunanidhi in Tamilnadu. Tamilnadu is in the south with a language Tamil of Dravidian origin, and W. Bengal is in the northeast near the Burmese and Bangladesh border with its own language Bengali of very different origin and completely different script. The regional parties have little in common. Some like the DMK in Tamilnadu are small parties with 18 member in parliament. Congress coalition government has 230 members and needs 270 for a parliamentary majority....

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The WSJ's Amol Sharma's interview with India's Gujarat state chief minister, Narendra Modi, in August 2012.

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The Indian government's chief economic advisor, Kaushik Basu, says the opening up of India's retail sector would have benefitted everyone including middle traders. This would happen because the retail sector would go through a vast expansion creating room for more players even though the per unit margin from products would go down. Experts say the infusion of new technologies and investment in India's supply chain and cold storage setup would help reduce food prices and inflation. Basu made the comments at the launching of the New Oxford Companion to Economics in India in Feb 2012. Basu is co-editor and it has contributions from Ratan Tata, Pranab Mukherjee, and Nandan Nilekhani.

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Prime minister Modi campaigning in his home state of Gujarat, and taking control of the campaign in the state. He has visited the state to launch the bullet train project, a new ferry service for Saurashtra, and for the Narmada dam completion.

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Jacobs and Richtel of the NYT give this exceptional story of how Mexico changed between 1980 and 2016. Following the joining of NAFTA free trade zone the Mexican diet and food ecosystem began to more closely resemble the food diet system in the U.S. bringing with it severe health consequences. Soda and coke are now more entrenched in Mexico, as are fast food outlets. In 1980 only 7% of Mexicans were obese, compared to 20% in 2016, according to Institute for Health Metrics at the University of Washington. And diabetes kills 80,000 people a year, becoming the top killer according to the World Health Organization. A trade expert at Tufts University, Timothy Wise, says Mexico took on the worst aspects of a first world country like the U.S., with few protections. A similar problem is taking place in India and China as obesity grows, according to the T.H. Chan School of Public Health at Harvard, as low nutrient highly processed foods of large food companies with huge advertising budgets take a prominent place in diets. This is a growing problem for countries from Colombia to Ghana and Nigeria. ...

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Mr. Rodrigo Maia, the 49 year old son of the former Mayor of Rio De Janeiro, Cesar Maia, is uniting Congressmen from all parties in Brazil's parliament to get things done and restore lost confidence, such as the recently passed pension reform. Brazil's pension system sucks up most of the money in the budget with overly generous benefits, leaving little to pay for essential public services such as sanitation and transportation. Shockingly sanitation has suffered as only 50% of the sewage is treated in Brazil.  Polls show confidence in parliament after corruption scandals and lack of work to help the people of Brazil with essential public services has fallen to an abysmal low of 7%. Only 50% of Brazil's sanitation is treated and the rest flows as untreated sewage and rubbish into the rivers. To bring some sanity to pensions the Brazilian parliament, with the organizing skills of Mr. Maia to bring parties together around the reform, has cut $240 billion over 10 years from pensions and introduced 65 years for men and 62 years for women as minimum retirement age.  Brazil has 33 parties and Mr. Maia's is with the centre right DEM party. How did this happen. This WSJ story says Rodrigo Maia, 49 years, was born in Santiago, Chile in 1970 during the days of Brazilian military dictatorship. His father was in exile in Chile. The election of a  far right figure Jair Bolsonaro who supported the military dictatorships record as president in the recent election was a warning sign for the different parties in Brazil on the centre right and the centre left that corruption scandals and a do-little spirit was wiping out their influence and destoroying their credibility with ordinary Brazilians. The pension cut reform was their response to gain some of the lost goodwill from the Brazilian people. In the past Brazil's members of the Chambers of Deputies were people of power and influence who held positions for long periods and passed on these positions to people in their families or in their close circle. The elections and democratic governments following years of dictatorship brought in a new class from centre right and centre left that mismanaged public finances and excluded new ideas. The Car Wash scandal and scandals at the state petroleum company under Da Silva's Workers Party led to loss of confidence not only in the centre left party government of Da Silva and the Workers Party, but also in a do-little parliament. The large state spending from the government was possible during the commodities boom from China with Brazilian iron ore and other products getting high prices. WIth the collapse of the commodities boom and lower prices the entire system of state spending has unraveled revealing how much generous pension system is damaging the financing of  basic public services.  Corruption is prevalent in many countries in Asia including India but nowhere has the spending on essential public services such as sanitation suffered as in Brazil. And nowhere was parliament and the government able to get away with staging Olympics, World Cup and building many stadiums, handing out generous benefits to gain public support as in Brazil when basic sanitation and health services were neglected in a shocking way. The health system was weakened to a great extent when it lacked the resources to tackle an outbreak of yellow fever in 2018 as it moved south from the Amazon region towards Sao Paulo and Rio de Janeiro. Protests against the lack of investment in public services such as transportation and bus systems resulted in the public protests in big cities that led to the rise of Jair Bolsonaro in an effort to bring new administration to tackle the problem of financing for infrastructure, public services, health and education.    ...

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India's inflation rate declined to 4.4% in Nov. 2014 and 5% in Dec. 2014. Price pressures are moderating throughout the economy. With lower oil prices in 2015 and long term trend for lower prices the outlook has improved for controlling inflation. The central bank governor Rajan cut rates by one quarter of a percentage point in Jan. 2015 and indicated further rate cuts are ahead to boost economic growth. The financial markets reflect a 1% decline in interest rates and the stock markets were up 2% in Jan. 2015

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The warm and hugely enthusiastic welcome given to India's newly elected prime minister Modi in New York in September 2014

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Turkey's lira depreciates by 21% in 2013 and an additional 7% by January 24, 2014. The central bank uses up a third of its foreign exchange reserves or $19 billion in intervention to support the lira since June 2013. The intervention on June 24, 2014, did not work and the lira continued its downward slide to 2.30 to the lira. The political protests in Turkey and divisions within factions in the government about corruption probes has led to a political crisis and investors pulling back from Turkey. The central bank failed to increase interest rates as expected by investors and suggested by the IMF. Inflation is running at 7.4% for 2013. In August 2001 a currency crisis caused the banking system to collapse. The financial position is stronger than in that crisis, yet the recent political crisis and the large current account deficit has badly dented investor sentiment.